Summary of J.P. Morgan Aluminium Dashboard Industry Overview - **Industry**: Aluminium - **Global Demand**: Increased by 2% year-to-date (YTD) through August, with China up 3% and the Rest of the World (RoW) up 1% [1][2] - **Production**: China's aluminium production is approximately 44 million tonnes per annum (Mtpa), nearing its production cap [1] - **Inventories**: Global visible aluminium inventories stand at 1,130 kilotonnes (kt), remaining below 2024 levels despite a recent increase of about 300 kt over the past three months [1] Key Insights - **Price Dynamics**: Aluminium prices have risen by 12% YTD, underperforming copper, which has increased by 22% [1] - **Alumina Prices**: Alumina prices have decreased by 50% YTD, positively impacting margins, with the alumina/aluminium linkage rate at historical lows of 11% compared to a long-term average of 17% [1] - **Future Market Outlook**: The forward curve indicates a slight contango, with expectations of a looser market by 2026 due to significant supply additions from Indonesia [1][2] Production and Demand Forecast - **2026 Projections**: Global primary aluminium production is expected to rise by 2.7% year-over-year (YoY), driven by a 5% increase in ex-China output, particularly from Indonesia, which is projected to add over 1.2 million tonnes of new supply [2] - **Market Surplus**: Anticipated modest surplus of approximately 400 kt in 2026 as demand growth slows to 2.1% YoY [2] Investment Recommendations - **Overweight Calls**: J.P. Morgan's key Overweight recommendations for aluminium exposure include: - Rio Tinto (RIO AU/RIO LN) - Norsk Hydro (NHY NO) - Press Metal (PMAH MK) [1] Financial Metrics of Key Companies - **Rio Tinto Ltd.**: Market cap of $118.2 billion, EV of $136.6 billion, with a target price of $137.0, indicating a 5% upside [5] - **Norsk Hydro**: Market cap of $13.8 billion, EV of $15.9 billion, with a target price of $74.0, indicating a 6% upside [5] - **Press Metal**: Market cap of $12.2 billion, EV of $13.1 billion, with a target price of $6.8, indicating a 9% upside [5] Additional Insights - **Alumina Production**: China's alumina production is projected to increase from 79.8 million tonnes in 2023 to 83.7 million tonnes in 2024 [19] - **Global Production and Demand Summary**: Global aluminium production is expected to rise from 143.3 million tonnes in 2023 to 146.9 million tonnes in 2024, with a corresponding increase in demand [17] This summary encapsulates the key points from the J.P. Morgan Aluminium Dashboard, highlighting the current state and future outlook of the aluminium industry, along with investment recommendations and financial metrics of key players.

Group 1 - Iron ore is a crucial raw material for steel production, with China accounting for over half of global steel output and importing more than a billion tons annually, primarily from Australia and Brazil [2] - Major Australian companies like BHP and Rio Tinto dominate the global iron ore market, leading to a situation where Chinese steel mills have historically faced low profit margins, averaging less than 1% net profit [2] - In response to the unfavorable pricing dynamics, China has diversified its iron ore sources, focusing on the Simandou project in Guinea, which is the largest undeveloped iron ore mine globally, with an annual capacity of 120 million tons [4] Group 2 - China's steel production surged from 270 million tons in 2003 to 510 million tons within five years, causing iron ore prices to rise from under $40 per ton to over $140, resulting in significant financial outflows to Australian mining companies [5] - In 2022, the establishment of China Mineral Resources Group centralized 40% of iron ore import procurement, allowing for unified negotiations and reducing the fragmentation of previous purchasing strategies [4] - By 2024, China's crude steel production is projected to reach nearly 1 billion tons, with iron ore imports accounting for 72% of global seaborne trade, yet profit margins for Chinese steel mills remain low [7] Group 3 - In August 2023, negotiations between China and BHP for long-term contracts for 2026 stalled over currency settlement preferences, with China pushing for RMB settlements while BHP insisted on USD [9] - Following a suspension of all BHP's USD iron ore purchases, BHP's stock price fell, highlighting its dependency on the Chinese market, which accounts for 60% of its exports [11] - A subsequent agreement allowed for 30% of fourth-quarter transactions to be settled in RMB, marking a significant shift in pricing dynamics and reducing exchange rate risks for Chinese steel mills [11][13] Group 4 - The shift to RMB settlements represents a broader change in pricing rules, reducing costs for Chinese steel mills and increasing their profit margins, while also weakening the pricing power of Australian exporters [13] - With the full production of Simandou, global iron ore supply is expected to increase by 10%, further diminishing the monopoly held by Australian companies [13] - The move towards RMB in iron ore trade is expected to enhance China's position in resource trade and promote the internationalization of the RMB [13]

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **Iron Ore and Coal** industry, focusing on market trends, production data, and trade dynamics. Core Insights and Arguments 1. **Iron Ore Prices and Market Sentiment** - Iron ore prices have increased to **$109/t**, aligning with other commodities due to improved sentiment from the China Work Plan and Fed rate cut expectations [5][6] - The positioning in the Dalian market shifted from a net short position of approximately **-3Mt** before the Golden Week to a broadly neutral stance [5] 2. **China's Iron Ore Inventory and Shipments** - Iron ore inventories in China are stable at ports and have increased seasonally at mills ahead of the Golden Week [5] - Year-to-date shipments from Brazil and Australia have increased by **3%** and **1%** respectively, while non-traditional supply and domestic production in China remain soft [5] 3. **Steel Production and Exports in China** - Steel production in China slowed seasonally in late September, but the MySteel utilization rate remains high at over **90%** post-Golden Week [5] - China's steel exports reached approximately **120Mtpa** in September, reflecting a **10%** month-over-month increase despite rising trade restrictions [6] 4. **Company Ratings and Free Cash Flow Estimates** - Neutral ratings are maintained for Vale, RIO, BHP, and FMG, with a Sell rating on KIO. Estimated spot 2026 free cash flow yields are **5%** for BHP, **10%** for RIO, and over **15%** for Vale [5] 5. **September Trade Data from China** - Preliminary September trade data indicates a **10%** month-over-month increase in iron ore imports to a record high of **116Mt**, while coal imports decreased by **3%** year-over-year [6] Additional Important Insights 1. **Production Guidance and Performance** - RIO's 3Q production is expected to be **84Mt**, down **1Mt** year-over-year, while BHP's shipments are projected at **69Mt**, down **3Mt** year-over-year [9] - Vale's production is anticipated to increase by **2Mt** year-over-year to **93Mt** in the September quarter [9] 2. **Future Production Estimates** - RIO has trimmed its 2025 guidance by approximately **7Mt** due to weather disruptions, now targeting the lower end of the **323-338Mt** range [9] - BHP's FY26 guidance is set at **284-296Mt**, with FMG targeting **195-205Mt** including contributions from Iron Bridge [9] 3. **Coal Market Dynamics** - Glencore announced a **5-10Mt** curtailment at the Cerrejon thermal coal mine due to weak market conditions, with FY production now estimated at **11-16Mt** [9][12] 4. **Regional Production Trends** - Brazilian iron ore producers, including Vale, are tracking towards the mid-point of their 2025 guidance range of **325-335Mt** [9] - South African and Canadian producers are also adjusting their production estimates based on market conditions and operational performance [11] This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the iron ore and coal industries.

Core Insights - The article emphasizes the importance of value investing, highlighting the strategy of identifying undervalued companies in the market [2][3] - Zacks has developed a Style Scores system to categorize stocks, with a focus on the "Value" category for value investors [3] Company Analysis: Rio Tinto (RIO) - Rio Tinto currently holds a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for value investors [4] - The stock is trading at a P/E ratio of 9.99, significantly lower than the industry average P/E of 18.06, suggesting it may be undervalued [4] - Over the past 52 weeks, RIO's Forward P/E has fluctuated between 8.49 and 10.78, with a median of 9.64 [4] - RIO has a P/B ratio of 1.26, which is attractive compared to the industry's average P/B of 1.78, indicating a favorable valuation [5] - The P/B ratio for RIO has ranged from 1.13 to 1.56 over the past 12 months, with a median of 1.31 [5] - Overall, RIO's strong value metrics and positive earnings outlook position it as an impressive value stock at the moment [6]

Group 1 - The quarterly pricing negotiations between Japanese aluminum buyers and global producers are unusually prolonged due to significant differences in opinions regarding the premium for primary aluminum for the October-December shipment period [1] - Japanese buyers have set a regional benchmark for premiums based on the London Metal Exchange (LME) spot price, but the ongoing negotiations have lasted several weeks after the quarter began, which is atypical [1] - Initial premium offers from producers ranged from $98 to $103 per ton, reflecting a decrease of 5% to 9% compared to the previous quarter [1] Group 2 - A producer later adjusted their offer from $103 to $97 per ton, but buyers rejected this, seeking a premium in the $80 range, citing current spot premiums in the low $70s [1] - A representative from a Japanese processing plant indicated that the $97 offer had expired and requested a new quote from producers, emphasizing weak demand and high inventory levels as reasons for their lower price expectations [1] - As of the end of September, aluminum inventories at Japan's three major ports reached 341,300 tons, an increase of 1.8% month-on-month [1] Group 3 - A producer's representative noted that rising premiums in the U.S. and Europe are expected to tighten supply in Asia, leading sellers to insist on higher price levels [2] - The negotiations are anticipated to continue until the end of the month [2]

Core Viewpoint - A US district judge is expected to approve Rio Tinto's $138.75 million settlement related to the Oyu Tolgoi mine expansion in Mongolia, following allegations of misleading investors about the project's issues [1][2]. Group 1: Settlement Details - The lawsuit was initiated by shareholders of Turquoise Hill Resources, claiming damages for the period from July 2018 to July 2019, when Rio Tinto predominantly owned the company [2]. - The settlement amount represents 34–43% of the damages that Pentwater Capital Management believed could be substantiated at trial, which Pentwater characterized as reasonable given the risks of ongoing litigation [3]. - Rio Tinto has not admitted any wrongdoing in the settlement agreement [2]. Group 2: Project Issues - Pentwater accused Rio Tinto and Turquoise Hill of deceiving investors by stating that the Oyu Tolgoi mine was progressing "on plan" and "on budget," despite facing delays of up to two-and-a-half years and cost overruns of up to $1.9 billion [4]. - In 2019, Rio Tinto disclosed a possible cost overrun of $1.9 billion, revising total capital expenditures to between $6.5 billion and $7.2 billion [4]. Group 3: Ownership and Acquisition - Turquoise Hill held a 66% ownership stake in the Oyu Tolgoi mine, while the Mongolian Government owned the remaining 34% [3]. - In 2022, Rio Tinto acquired the remaining 49% of Turquoise Hill for $3.3 billion, fully integrating the mine into its copper portfolio [5].

Core Viewpoint - Hitachi Construction Machinery has signed a memorandum of cooperation with Rio Tinto's subsidiary Technological Resources Pty Limited to develop remote control technology for large hydraulic excavators over the next five years, aiming to enhance safety and productivity in mining operations [3][4]. Group 1: Cooperation Details - The cooperation focuses on developing driving assistance, remote control, and semi-automated driving technologies for large hydraulic excavators [3]. - Hitachi Construction Machinery will be responsible for the development of remote control technology, while Rio Tinto will provide operational data and feedback from mining sites in Western Australia [3][4]. - The semi-automated driving feature allows operators to set the starting and loading positions, enabling the system to automatically repeat subsequent operations [3]. Group 2: Future Plans - Hitachi Construction Machinery plans to establish a scalable platform by 2030, allowing multiple large hydraulic excavators with semi-automated driving capabilities to operate in mining sites [4]. - This collaboration builds on previous strategic projects between Hitachi and Rio Tinto, including durability verification of excavator arms and evaluation of operator assistance technologies [4]. - The partnership aims to accelerate the development of highly versatile autonomous driving technology through testing in diverse site conditions [4]. Group 3: Industry Context - The engineering machinery industry is showing signs of recovery, with expectations of improved performance and demand in the coming months [6][10]. - The transition to "National IV" emissions standards is set to begin on December 1, which may impact the market dynamics for construction machinery [6]. - The industry has experienced a significant increase in exports, with a rise of over 70% despite a continuous decline in domestic sales for 13 months [6].

Group 1: Sapporo Holdings - Sapporo Holdings is nearing a definitive agreement to sell its real estate business, including the Yebisu Garden Place complex, to a consortium led by KKR and PAG for approximately ¥400 billion ($2.7 billion) [2][3][9] - This strategic divestment is driven by investor pressure for enhanced capital efficiency and a focus on the core beverage business [3][9] Group 2: Australian Critical Minerals - Australian critical minerals stocks are experiencing a significant surge, particularly in copper production, due to strong global demand and supply constraints [4][9] - Recent supply disruptions, such as incidents at the Grasberg mine in Indonesia and El Teniente mine in Chile, have tightened global copper supply, benefiting Australian producers [5][9] Group 3: Rio Tinto - Rio Tinto reported a 54% year-on-year increase in copper output from its Oyu Tolgoi mine in Mongolia during the first half of 2025, contributing to a 69% rise in group copper earnings to $3.1 billion [6][9] - The overall copper production for Rio Tinto increased by 16% to 438,000 tonnes during the same period [6][9] Group 4: ASX Market Dynamics - The gains in the mining sector have contributed to a 0.3% increase in the broader ASX 200 index [7][9] - The ASX is preparing for increased competition in the market, particularly from players like Cboe [7][9]

Geopolitical and Financial Developments - G7 nations, including the UK and Canada, are advancing plans to utilize nearly $300 billion in frozen Russian central-bank assets to provide significant financial support to Ukraine, with discussions focused on a €140 billion loan [2][3] U.S. Health Department Controversy - The U.S. Department of Health and Human Services (HHS) mistakenly fired 778 employees during a reduction-in-force initiative, which was part of a broader effort to cut the federal workforce [4][5] Critical Minerals Market - Critical minerals stocks, particularly copper producers like Rio Tinto, are experiencing a surge due to tightening global supply and robust demand, with Rio Tinto reporting a 15% year-on-year increase in Q2 copper production to 229,000 tonnes [6][7] - Rio Tinto's Oyu Tolgoi mine in Mongolia has seen a 54% year-on-year increase in copper output in the first half of 2025, contributing to overall production growth [6][7][8] Legislative Developments - The Senate GOP is attempting to advance a three-bill "minibus" package to fund government operations during an ongoing government shutdown, which includes key appropriations bills [9][10]

Core Insights - Rio Tinto Group reported flat iron ore shipments of 84.3 million tons for Q3 2025, with a 6% sequential increase, marking the second-highest third-quarter shipment since 2019 [1] - Bauxite production rose 8.5% to 16.4 million tons, achieving a record quarterly production due to Amrun operating above capacity [2] - Mined copper production increased by 10% to 204 thousand tons, with significant contributions from Oyu Tolgoi and Escondida [3] Iron Ore Production - Total iron ore production for Q3 was 84.1 million tons, consistent with the previous year [1] - Rio Tinto's share of shipments was 71.4 million tons, down 1%, while its share in total production was 71.8 million tons, up 1% [1] Bauxite and Aluminum Production - Bauxite production reached a record 16.4 million tons, up 8.5% year over year, prompting an increase in full-year production guidance [2][9] - Aluminum output rose 6% to 857 thousand tons, with alumina production increasing by 7% to 1.9 million tons [2] Copper Production - Mined copper production was 204 thousand tons, a 10% increase year over year, with Oyu Tolgoi's production up 78% [3][9] - Production at Kennecott was significantly lower due to planned maintenance [3] Titanium Dioxide and Other Production - Titanium dioxide slag production declined by 1% due to weak market conditions [4] - Production at Iron Ore Company of Canada increased by 11% year over year [4] Production Guidance for 2025 - Rio Tinto expects Pilbara iron ore shipments to be at the lower end of 323-338 million tons due to cyclone impacts [5] - Bauxite guidance has been raised to 59-61 million tons from 57-59 million tons [5] - Alumina production is anticipated between 7.4 million tons and 7.8 million tons, while aluminum production is expected to be 3.25-3.45 million tons [6] Cost Guidance for 2025 - Pilbara iron ore unit cash costs are expected to be between $23.00 and $24.50 per ton [7] - Copper C1 unit costs are forecasted between $110 and $130 per pound [7] Share Price Performance - Over the past year, Rio Tinto's shares have gained 7.2%, compared to the industry's growth of 21.7% [8]