Report Industry Investment Rating No relevant content provided. Core Views of the Report - The alumina market is in a state of weak reality versus production cut expectations. The price has stabilized, but a rebound remains weak without large - scale production cuts. The support level for the next month is expected to be around 2750 - 2800 yuan/ton [3][67]. - The electrolytic aluminum market has relatively low supply pressure, with overseas supply disruptions and an increasing domestic aluminum - water ratio. Consumption shows resilience, and with the copper - aluminum ratio repair logic, the aluminum price is expected to be positive. After a short - term adjustment, the aluminum price is likely to remain bullish [3][68][70]. Summary According to the Directory 1. Market Review - In October, the main alumina futures contract was still weak, with the price fluctuating narrowly between 2800 - 2880 yuan/ton, and the trading volume increased [9]. - In October, the Shanghai aluminum futures contract oscillated upwards, reaching a new high of 21425 yuan/ton. The LME aluminum was relatively stronger, reaching 2917 dollars/ton at one point. The Shanghai - LME aluminum ratio decreased from 7.63 to 7.32, and the import loss expanded to about 2500 yuan/ton [9]. 2. Macroeconomic Analysis Overseas - The Sino - US tariff negotiation in October had positive results. The Fed cut interest rates by 25BP in October and ended quantitative tightening in December. The market's expectation of a December interest rate cut decreased from over 90% to less than 70% [14]. - In the US, the September CPI rose seasonally, and the October Markit composite PMI rebounded. In the eurozone, the October composite PMI also rebounded, mainly due to the strong performance of the German service industry [15][16]. Domestic - In the first three quarters, China's GDP grew by 5.2% year - on - year, and the industrial added value increased by 6.2%. In September, the CPI and PPI improved, and the new social financing in September was 3.53 trillion yuan [17][19]. - From January to September, China's exports increased by 6.1% year - on - year, and imports decreased by 1.1%. The trade surplus was 8750.8 billion dollars. In September, exports and imports both increased significantly [18]. 3. Alumina Market Analysis Bauxite - In October, the supply of domestic bauxite was tight, and the price was stagnant. From January to September, China imported 157.637 million tons of bauxite. In September, the import volume was about 15.88 million tons [22]. - The price of domestic bauxite may continue to decline slightly due to the weak profit of downstream alumina and the seasonal decrease in the arrival of imported bauxite [23]. Alumina Supply - In September, China's alumina production was 7.623 million tons, and it is estimated to be about 7.85 million tons in October. In the long run, some high - cost enterprises may face production cuts [24]. - In September, the alumina import volume was 59,980 tons, and the export volume was 246,420 tons. Since mid - September, the import window has been open, which is expected to break the net export pattern [26]. Alumina Inventory and Spot - By the end of October, the alumina futures exchange inventory was 223,000 tons, an increase of 53,000 tons from the end of last month. The spot premium remained high and volatile [27]. Alumina Cost and Profit - In September, the average fully - cost of the Chinese alumina industry was 2932.46 yuan/ton, an increase of 2.08 yuan/ton from August, mainly due to the increase in raw material prices [28]. Alumina Outlook - The alumina market is still in a state of weak reality versus production cut expectations. The price has stabilized, but the rebound is weak without large - scale production cuts. The support level for the next month is expected to be around 2750 - 2800 yuan/ton [29][67]. 4. Electrolytic Aluminum Market Analysis Electrolytic Aluminum Supply - In September, China's primary aluminum production was 3.6488 million tons, and it is estimated to be about 3.772 million tons in October. The aluminum - water ratio is expected to rise to 77.3% in October [36]. - In September, the global (ex - China) electrolytic aluminum production was 2.436 million tons. In October, the production of Century Aluminum's Icelandic smelter decreased, and the overseas production is expected to continue to decline [36][39]. - From January to September, China's cumulative primary aluminum imports were about 1.9624 million tons, and the cumulative exports were about 182,300 tons. The cumulative net imports were 1.78 million tons [39]. Electrolytic Aluminum Inventory - By the end of October, the aluminum ingot inventory was 618,000 tons, an increase of 34,000 tons from the end of last month. The aluminum rod inventory was 146,000 tons, and the social inventory of aluminum ingots + aluminum rods was 772,000 tons, an increase of 65,000 tons [40]. - The SHFE electrolytic aluminum inventory warrant was 66,000 tons, an increase of 7000 tons from last month, and the LME inventory was 469,000 tons, a decrease of 44,000 tons [40]. Electrolytic Aluminum Spot - In October, the spot discount was close to par to a slight premium during the mid - month delivery, and was around a discount of 50 yuan/ton at the beginning and end of the month. The LME 0 - 3 month contract remained in a slight premium state [41]. Electrolytic Aluminum Cost and Profit - In October, the theoretical average fully - cost of the Chinese electrolytic aluminum industry was 15,793.93 yuan/ton, a decrease of 334.24 yuan/ton from last month. The monthly theoretical profit was 5188.93 yuan/ton, an increase of 546.18 yuan/ton from last month [42]. 5. Consumption Analysis Aluminum Processing - In October, the performance of aluminum processing was lackluster during the peak season. In November, the demand in the construction and some industrial fields will continue to weaken, but the demand in the new energy vehicle and power sectors will remain relatively stable [59]. Domestic Terminal Consumption - In the real estate sector, from January to September, the cumulative new construction area decreased by 18.9% year - on - year, the cumulative completion area decreased by 15.3%, and the cumulative construction area decreased by 9.4% [60]. - In the new energy vehicle sector, in September, the production and sales of new energy vehicles were 1.617 million and 1.604 million respectively, with year - on - year growth of 23.7% and 24.6% [61]. - In the power sector, from January to September, the State Grid completed fixed - asset investment of over 420 billion yuan, a year - on - year increase of 8.1%. It is expected that the annual investment will exceed 650 billion yuan for the first time [61]. - In the photovoltaic sector, in September, the newly - added photovoltaic installed capacity was 9.7GW, a month - on - month increase of 31.79% and a year - on - year decrease of 63.94%. From January to September, the newly - added installed capacity was 240.31GW, a year - on - year increase of 49.37% [62]. Aluminum Exports - In September, China's exports of unwrought aluminum and aluminum products were 521,000 tons, a month - on - month decrease of 1.8%. From January to August, the cumulative exports were 4.516 million tons, a year - on - year decrease of 8.1% [64]. 6. Market Outlook - Macroscopically, the Fed's policy and the Sino - US trade negotiation will affect the market. The domestic demand - side policy is worth looking forward to [67]. - In the alumina market, the supply pressure is still large, but the production cut expectation is increasing. The price has stabilized, but the rebound is weak without large - scale production cuts [67]. - In the electrolytic aluminum market, the supply pressure is small, and the consumption has resilience. With the copper - aluminum ratio repair logic, the aluminum price is expected to be positive. After a short - term adjustment, the aluminum price is likely to remain bullish [68][70].

Summary of the Conference Call on the Electrolytic Aluminum Sector Industry Overview - The electrolytic aluminum sector is benefiting from the recovery of the copper-aluminum ratio, with pricing logic shifting towards supply tightness due to frequent production cuts in overseas electrolytic aluminum plants, which is expected to drive a revaluation of the sector as emerging industries like AI develop and developed countries face electricity shortages [1][3][10]. Core Insights and Arguments - The core logic for the valuation recovery in the electrolytic aluminum sector is the transition from a smelting and processing type to a resource-like commodity, with many companies increasing their dividend payout ratios to over 50%, resulting in a significant increase in dividend yield [1][5]. - The current price-to-earnings (PE) ratio is around 8-9 times, with expectations for recovery to 10-15 times over the next 3-5 years [1][5]. - The copper-aluminum ratio is currently at a historical high of 4.1 times, driven by supply-side changes and improvements in industrial demand, with expectations for normalization in the coming years [1][6][8]. - The supply of scrap metal is insufficient to fully address market shortages due to the lack of recycling from buildings and the rapid price increase of scrap compared to primary metals [1][9]. - The implementation of fair competition regulations has led to reduced tax rebates and subsidies from local governments, increasing profitability pressure and production cuts in the aluminum industry [1][9]. Additional Important Points - Global electricity shortages, particularly in developed countries, pose uncertainties for electrolytic aluminum production, with potential reductions affecting approximately 3 million tons of capacity [1][10]. - Industrial metal demand remains resilient, supported by sectors such as new energy vehicles, energy storage, and grid construction, with expectations for a 2-3% growth in the global economy [1][11]. - The aluminum sector currently offers significant investment advantages, including high dividend yields and potential for valuation recovery, with average yields around 4-5% and PE ratios expected to rise [1][12][13]. - Integrated leading companies such as Tianshan, Hongqiao, Hongchuang, and Zhonglv are performing well, with notable dividend yields and growth potential [1][14].

Summary of Conference Call on Aluminum and Copper Market Dynamics Industry Overview - The current copper-to-aluminum ratio is at a historical high of approximately 4.2 times, with expectations for a correction during the latter part of the interest rate cut cycle, suggesting aluminum may replicate copper's upward trend over the next three to five years [1][2][8] - The aluminum sector is currently undervalued, with an average dividend yield of 5-10% and a price-to-earnings (PE) ratio of 8 times, projected to rise from 8-9 times to 10-15 times by 2026, potentially doubling or more [1][2][15] Key Insights and Arguments - The inflation cycle typically sees gold leading, followed by silver, then copper and aluminum; thus, aluminum, which is currently at a low price point, should be a focus [1][3] - The average valuation metrics for the non-ferrous metals sector include a price-to-book (PB) ratio of 2 times, a return on equity (ROE) of 20%, and a PE ratio of 8 times, indicating a combination of resilience and dividend defensiveness [1][3] - The copper-aluminum price bottom usually occurs at the end of an interest rate cut cycle, aligning with economic recovery phases [4][5] Market Dynamics - The supply of electrolytic aluminum in China has reached its capacity ceiling, while uncertainties in overseas energy consumption will gradually restore the copper-to-aluminum ratio to normal levels [1][9] - Fund holdings in the sector are significantly lower than the previous year, with only 4.7% to 4.8% allocation in Q2, indicating a relatively low market crowding and room for recovery [1][7] Future Projections - Aluminum is expected to become a resource commodity similar to copper due to its price elasticity and diverse demand, with a current profit margin of approximately 3,000 yuan per ton [2][8] - The anticipated increase in demand for alternative materials, such as aluminum wire bundles, is expected to further support aluminum's market position [10] - The global energy consumption for electrolytic aluminum production accounts for about 3% to 3.5% of total electricity usage, with potential supply uncertainties due to energy constraints [11][12] Investment Opportunities - Companies with high elasticity, such as Zhongfu, Yun Aluminum, and Tianshan, are recommended for those seeking growth, while more stable options include Hongqiao, Hongchuang Holdings, and China Aluminum [2][15] - The aluminum sector's dividend yield is projected to remain strong, with some companies maintaining a dividend payout ratio of 60% [14] Conclusion - The aluminum sector is poised for significant growth over the next few years, driven by supply constraints and increasing demand for aluminum as a substitute material. The current market conditions present a favorable investment landscape for both growth and income-focused investors [15][18]