Zhi Tong Cai Jing·2025-11-11 08:08Core Viewpoint - The rapid development of AI globally is driving a surge in electricity demand, creating strong investment value in the Chinese aluminum sector due to significant electricity cost advantages, multiple growth drivers on the demand side, and tightening supply conditions [1][2][3] Group 1: Investment Outlook - Bank of America raised the profit forecast for China Hongqiao (01378) for 2026-2030 by 5-14%, increasing the target price from HKD 35 to HKD 38, while maintaining a "Buy" rating [1] - The support for this outlook includes a dividend yield of 6%-7%, the commissioning of the Ximangdu project by the end of 2025, share buybacks, and a valuation advantage with a 9x P/E ratio in 2026 [1] Group 2: Cost Advantages - Chinese aluminum producers benefit from a significant electricity cost advantage, with electricity prices in China being 20% lower than in India and 30%-60% lower than in Europe and the U.S. [1] - Aluminum production requires 13,500 kWh of electricity per ton, resulting in a cost advantage of RMB 1,200-3,600 (approximately USD 170-500) per ton compared to competitors in other regions [1] Group 3: Demand Drivers - Global data center electricity consumption is expected to grow from 416 TWh in 2024 to 946 TWh by 2030, with a compound annual growth rate (CAGR) of 15% [2] - AI data center aluminum demand is projected to increase from 330,000 tons in 2025 to 695,000 tons by 2030, with a CAGR of 16% [2] - The expected shipment volumes for energy storage batteries in 2025 and 2026 are 500 GWh and 650 GWh, respectively, translating to aluminum demand of 250,000 tons and 325,000 tons [2] Group 4: Supply Constraints - The supply side is tightening, with international producers like Century Aluminum (CENX.US), South32 (SOUHY.US), and Rio Tinto (RIO.US) facing production cuts or closures due to various electricity issues [2] - The established aluminum production capacity cap of approximately 45 million tons in China is expected to support aluminum prices globally, particularly as high-cost producers face challenges [2] Group 5: Market Dynamics - Based on the assessment of supply-demand balance and expanding cost advantages, Bank of America believes that the cyclicality of low-cost integrated producers like China Hongqiao will weaken, leading to a potential revaluation of their stock [3]