J P M O R G A N Asia Pacific Equity Research 28 November 2025 Aluminium Dashboard Metals & Mining Bill Peterson (1-415) 315-6766 bill.peterson@jpmchase.com J.P. Morgan Securities LLC Patrick Jones (44-20) 7742-5964 patrick.jones@jpmorgan.com J.P. Morgan Securities plc Global demand up 2% YTD; inventories and alumina prices remain low, while Midwest Premium spikes higher Key takeaways: (1) Global aluminium demand is up 2% YTD (China +3%, RoW flat); China production continues to hover just below the 45Mtpa ca ...

China Aluminium Sector Equities 2026 outlook: Tightening supply meets resilient demand Entering 2026 with firmer fundamentals and rising tightness: After a year of severe raw material cost pressure in 2024, the market stabilised through 2025 as alumina and bauxite prices corrected and downstream demand continues to grow, supporting margin expansion. The aluminium market exits 2025 with signs of a structurally tighter balance as domestic utilisation remains high under the 45mt cap and inventories remain low. ...

Financial Performance and Targets - Hydro achieved an adjusted RoaCE of 13.5% over the last 5 years [13, 183] - The company aims to deliver NOK 6.5 billion in annual improvements by 2030 through its improvement program [188, 246] - Hydro's capital allocation targets for 2025 and 2026 are reduced to NOK 13.5 billion [249] - The company targets an adjusted net debt to adjusted EBITDA ratio well below 2.0x over the cycle, with the LTM Q3-2025 ratio at 0.7x [186] - Total shareholder distributions since 2021 amount to NOK 41.0 billion [186] Extrusion Business - Hydro Extrusions is targeting an EBITDA uplift of NOK 8.0 - 10.0 billion by 2030 [68] - The company intends to reduce extrusion capacity by approximately 80 kt annually in Europe [134] - Hydro Building Systems experienced a 54% increase in EBITDA YTD 2025 in the Middle East [159] Recycling Business - The company estimates EUR 9 million out of EUR 10-15 million of Alumetal synergies will be delivered in 2025 [80] - Hydro is targeting an extrusion ingot recycling EBITDA margin of approximately USD 95/tonne in Q3 2025 [72] - Recycling adjusted EBITDA roadmap 2030 potential is NOK ~ 5 - 6 billion [83] Low-Carbon Transition and Sustainability - Hydro is projecting to deliver a CO2 reduction of 15% by year-end 2025 [14] - The company has a target to reduce CO2 emissions by 30% by 2030 [92] - Hydro has secured a new long-term power contract with Hafslund Kraft AS for 3.5 TWh of renewable energy supply from 2031 to 2040 [90]

Core Insights - Hydro is executing its 2030 strategy effectively, achieving strong results despite market uncertainties, with a focus on green transition opportunities and investments in electric infrastructure [1][3][4] Strategic Direction - In 2023, Hydro launched its strategy to lead the green aluminium transition, emphasizing renewable energy as a critical component in navigating complex market conditions [3][4] - The company aims to consolidate its Extrusions operations by closing five European plants to enhance competitiveness, with a restructuring cost of NOK 1.9 billion and expected annual savings of NOK 0.5 billion from 2027 [4][8] Financial Flexibility and Cost Management - Hydro is implementing a strategic workforce and cost reduction program, targeting a reduction of approximately 750 white-collar positions, with expected annual savings of around NOK 1 billion from 2026 [5][8] - A new NOK 6.5 billion improvement program was launched in 2024 to enhance resilience and accelerate value creation, with NOK 1.2 billion in improvements anticipated for 2025, exceeding the initial target [6][8] Capital Allocation - Capital allocation targets for 2025 and 2026 have been reduced to NOK 13.5 billion from NOK 15 billion, with the removal of additional annual flexibility of NOK 1–2 billion [7][8] - The 2030 EBITDA target for Extrusions has been revised down from NOK 10-12 billion to NOK 8-10 billion due to market conditions and reduced capital allocation [8] Recycling and Extrusions Growth - Hydro is strengthening its position in Recycling, with a target of reaching 850 kt of post-consumer scrap capacity by the end of 2025, contributing to its decarbonization goals [10][11] - The adjusted 2030 earnings target for Recycling has been lowered to NOK 5–6 billion, reflecting current market conditions [11][12] Renewable Power Investments - Hydro approved its largest hydropower investment in over two decades, the Illvatn pumped storage project, costing NOK 2.5 billion and expected to add 48 MW of capacity [14] - The company has secured long-term renewable power agreements totaling approximately 4.16 TWh, enhancing its power portfolio [15] Decarbonization Efforts - Hydro is on track to achieve a 15 percent CO2 reduction by the end of 2025, surpassing its initial 10 percent target [16] - The company aims to halve non-GHG emissions by 2030 and is enhancing transparency through various initiatives [17] Community Engagement and Education - Hydro supports over 300 community projects and is progressing towards its goal of educating 500,000 people by 2030, having already reached 250,000 [18][19] Financial Performance - Hydro's adjusted EBITDA for Q4 2024 to Q3 2025 was NOK 31 billion, an increase from NOK 22.4 billion in 2024, with a robust adjusted RoaCE of 13.5 percent over the past five years [22] - The company expects stable net operating capital, with guidance set at NOK 30 billion for year-end 2025 and 2026 [23]

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: The conference call primarily discusses the metals and mining industry, with a specific emphasis on steel, iron ore, copper, aluminum, rare earths, and lithium markets in China [1][3][5][27]. Steel Market Insights - **Steel Demand**: Steel demand is considered stable, with strong demand from manufacturing, automotive, shipbuilding, and exports offsetting weaknesses in the property and infrastructure sectors. The real estate sector is nearing a bottom, but further modest declines are expected in 2026 and 2027 [3][8]. - **Export Markets**: Steel mills are targeting robust export markets in the Middle East, Southeast Asia, Africa, and Latin America, with significant contributions from the "One Belt, One Road" initiative. Estimated indirect steel exports are around 150 million tons, alongside 120 million tons of finished steel exports [3][8]. - **Production Cuts**: There are no significant enforced production cuts, with minor adjustments due to environmental regulations. Concerns about illegal capacity in Hebei and Shandong are noted, with estimates suggesting it accounts for about 10% of production [3][9]. - **Profit Margins**: Profitability has declined, with margins dropping from RMB 400-500 per ton to approximately RMB 200 per ton. Some companies anticipate steel prices may fall below RMB 3,000 per ton [9]. Iron Ore Market Insights - **Price Outlook**: Iron ore prices are expected to stabilize around US$100 per ton in the near term, with a potential slight softening in 2026 due to new supply from Simandou. The market is projected to remain within a range of US$90-110 per ton for the next two years [16][18]. - **Supply Dynamics**: The China Mineral Resources Group (CMRG) is centralizing iron ore purchasing, currently managing about 50% of imports. CMRG aims to stabilize prices around US$95 per ton through strategic restocking [18]. - **Market Surplus**: A slight surplus in the iron ore market is anticipated over the next two years, with a shift in purchasing patterns noted among steel mills [18]. Copper Market Insights - **Demand Growth**: China's apparent copper consumption grew by approximately 9% in 2025, driven by strong demand in the power grid and automotive sectors. However, refined copper consumption growth is projected to moderate to around 2.7% in 2026 [28][29]. - **Price and Substitution**: Raw material shortages are supporting copper prices, with forecasts suggesting an average price of US$10,500 per ton in 2026. Substitution of aluminum for copper is occurring in some applications, but large-scale changes remain challenging [28]. - **Smelter Production**: Smelting capacity is underutilized, and new capacity additions face regulatory hurdles. The government is expected to implement policies to cap copper smelting capacity [29]. Aluminum, Rare Earths, and Lithium Insights - **Aluminum Market**: An ongoing shortage of aluminum is anticipated, with prices potentially rising from RMB 20,000 to RMB 21,000 per ton. The production cap of 45 million tons per year is expected to be reached by 2026 [5]. - **Rare Earths**: Demand for magnets is growing at around 10%, with export restrictions on heavy rare earths remaining in place [5]. - **Lithium Demand**: The lithium market is robust, driven by electric vehicle sales projected to grow by 30% in 2025. Lithium carbonate inventories in China are declining, with expectations of a tightening market by mid-2026 [5]. Additional Observations - **Scrap Supply**: The scrap market is primarily private, with 80% of dealers being private entities. Supply has remained consistent, but sourcing scrap at current prices is becoming challenging for some steel mills [10]. - **Government Policies**: Ongoing government policies aimed at urban renewal and infrastructure development are expected to support demand across various sectors, particularly in coastal areas and tier 1 cities [8]. This summary encapsulates the key insights and projections from the conference call, highlighting the dynamics within the metals and mining industry, particularly in the context of the Chinese market.

Core Viewpoint - China Hongqiao Group, the largest private aluminium producer in China, is planning to raise HK$11.68 billion (US$1.5 billion) through a share sale to fund projects and repay debt, leveraging strong industry margins and a favorable Hong Kong equity market [1][2]. Group 1: Fundraising Details - The company intends to sell up to 400 million existing shares at HK$29.20 each, which is a 9.6% discount to its closing price on Monday [1]. - The placed shares will represent approximately 4% of China Hongqiao's enlarged share capital [4]. - The offer price is nearly 2.2% higher than the average closing price of around HK$28.58 per share over the past 30 trading days [4]. Group 2: Market Conditions - Aluminium prices are currently near a three-year high due to solid demand and controlled supply [4][5]. - Analysts expect tight supply conditions to persist, benefiting from China's capacity cap policy and limited capacity additions in Indonesia, which will support higher aluminium margins [5]. Group 3: Analyst Insights - Citigroup has raised China Hongqiao's 12-month target price to HK$36 from HK$25.20, citing improved margins, superior profitability, and an attractive shareholder return policy [6]. - The management's cautious approach towards the company's expansion projects in Indonesia is noted as a positive factor [6].

Summary of the Conference Call on China's Aluminium Sector Industry Overview - The report focuses on the **China Aluminium Sector** and its supply-demand dynamics, highlighting the constrained supply and rising prices due to tight fundamentals [2][4][9]. Key Points Supply Constraints - China's aluminium industry capacity is capped at **45.2 million tonnes per annum (mtpa)**, currently operating at over **98% utilization** [3][9]. - Planned capacity additions for 2026 include **200,000 tonnes per annum (ktpa)** from Tianshan and **350 ktpa** from Zhalv, with no new capacity expected for 2027 [3][9]. - Ex-China, new capacity is anticipated mainly from Indonesia, contributing **400 kt** and **200 kt** YoY in 2026 and 2027, respectively [3][9]. Demand Growth - UBS forecasts global primary aluminium demand growth of **4%** for both 2026 and 2027, while supply growth is expected to be only **1-2%**, potentially leading to market deficits [4][9]. Price Forecasts - Aluminium price forecasts for China have been raised by **5%** for 2026 and **7%** for 2027, now projected at **Rmb22,000/t** and **Rmb23,000/t**, respectively [2][16]. - The global aluminium price is also expected to rise, with UBS increasing its LME aluminium price forecasts by approximately **15%** [2][16]. Earnings Revisions - Net profit estimates for major companies in the sector have been revised upwards: - **Hongqiao**: +11% for 2026E, +16% for 2027E - **Chalco**: +14% for 2026E, +22% for 2027E - **Tianshan**: +12% for 2026E, +26% for 2027E [5][17][18][19]. Price Target Adjustments - Price targets (PT) for key companies have been adjusted significantly: - **Hongqiao**: Raised from **HK$28.0** to **HK$38.60** (implying a **10x** 2026E PE) [5][17]. - **Chalco-H**: Increased from **HK$8.60** to **HK$13.10** [5][18]. - **Chalco-A**: Upgraded from **HK$8.30** to **HK$12.40** [5][18]. - **Tianshan**: Increased from **Rmb12.60** to **Rmb17.00** [5][19]. Investment Ratings - The report reiterates **Buy** ratings on **Hongqiao**, **Tianshan**, and **Chalco-H**, while upgrading **Chalco-A** to **Buy** from Neutral [5][18][19]. Additional Insights - The report emphasizes the importance of corporate governance improvements and stable earnings delivery for Chalco, which supports the upgraded ratings [18]. - The aluminium market is expected to remain tight, with potential drawdowns in visible inventory supporting price increases [4][9]. Conclusion - The outlook for China's aluminium sector remains positive, driven by constrained supply, rising demand, and improved earnings forecasts for key players, making it an attractive investment opportunity.

Group 1: IPO Details - Chuangxin Industries Holdings aims to raise up to HK$5.5 billion (US$707 million) in its initial public offering (IPO), attracting commitments from 18 domestic and international investors, indicating strong demand in Hong Kong's fundraising market [1][4] - The company plans to offer 500 million shares priced between HK$10.18 and HK$10.99, with 90% allocated to institutional investors and the remaining 10% to retail investors, and trading is expected to commence on November 24 [2] - Cornerstone investors include Glencore, Hillhouse Group, China Hongqiao Group, Mercuria Energy Group, Millennium Management, and Jane Street, collectively committing around US$351 million based on the upper price range [3] Group 2: Market Context - The IPO occurs during a rebound in Hong Kong's equities, with global investors, including US funds, showing renewed interest in Chinese firms [4] - Total funds raised from new share sales in Hong Kong surged by 220% in the first nine months of the year, with 66 companies raising US$23.27 billion, making the Hong Kong stock exchange the top global IPO venue for the first time since 2019 [5] - Over 300 companies are in the listing pipeline as international investors' appetite returns, with many Chinese firms using Hong Kong for global expansion [6] Group 3: Use of Proceeds - Chuangxin plans to allocate half of the IPO proceeds to expand its overseas production capacity, including a project in Saudi Arabia, while the remainder will be used for constructing green energy projects, working capital, and general corporate purposes [7]

Summary of Aluminium Industry Conference Call Industry Overview - The aluminium industry is facing a significant shift as China's aluminium production reaches its capacity cap of 45 million tonnes per annum (mtpa), limiting further growth and creating better conditions for smelter margins [2][14][10] - Supply outages in Europe and increasing power demands from other sectors, particularly AI, are complicating the operational landscape for aluminium smelters [3][24][10] Key Points Supply Dynamics - China's aluminium output is currently at 45.2 million tonnes year-to-date, indicating limited room for further growth [14][16] - Net exports from China have decreased by approximately 700,000 tonnes year-to-date, contributing to a tighter market [2][14] - Indonesia's aluminium output is projected to grow significantly, with estimates suggesting an increase from around 500,000 tonnes in 2024 to 3.6 million tonnes by 2030, but this growth may not be sufficient to offset the overall market deficit [39][41] Market Deficit Projections - The aluminium market is expected to be in a deficit in 2026, with projections indicating a shortfall of 600,000 tonnes, which could increase to nearly 800,000 tonnes when factoring in outages from Century's Iceland smelter [58][62] - The potential shutdown of the Mozal smelter in March 2026 adds to the risk of a larger deficit [11][34] Price Outlook - Aluminium prices are forecasted to average $2,750 per tonne in 2026, above the consensus estimate of $2,620 per tonne, with potential for prices to breach $3,000 per tonne under current market conditions [5][62][63] - A bullish scenario could see prices rise to $3,300 per tonne, contingent on further supply disruptions [5][63] Power Supply Challenges - Aluminium smelting is highly electricity-intensive, requiring 14-16 MWh per tonne, which is increasingly competing with rising power demands from AI and other sectors [3][24] - Smelters are struggling to secure long-term power contracts at competitive rates, with the US Aluminium Association indicating a need for contracts around $40/MWh, while some tech companies are securing contracts at $100+/MWh [3][24][33] Regional Insights - In Europe, the restart of idled smelting capacity is becoming more challenging, with significant risks that some capacity may remain offline due to difficulties in securing power contracts [25][29] - The US market has seen limited restarts of idled capacity despite high premiums, with only Century Aluminium announcing a partial restart [31][37] Demand Trends - China's aluminium demand is projected to rise by 3% in 2025, driven by investments in grid infrastructure, solar installations, and electric vehicles, but growth is expected to slow to 2% in 2026 [47][48] - The slowdown in solar installations, which currently account for about 10% of China's aluminium demand, poses a risk to future demand growth [48] Additional Insights - The competition for electricity and the challenges in securing long-term contracts are critical factors that could impact the operational viability of smelters globally [3][24] - The aluminium market's historical tendency to trade close to its cost curve may change as supply tightens, potentially leading to improved smelter margins [15][62] This summary encapsulates the key insights and projections regarding the aluminium industry as discussed in the conference call, highlighting the interplay between supply constraints, demand trends, and pricing dynamics.

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: The conference call primarily discusses the metals and materials industry, with a particular emphasis on aluminium, copper, gold, and construction materials [2][3][4][9]. Core Insights and Arguments - **Resilient Metals Demand**: Despite various challenges, metals demand has remained strong, driven by front-loading shipments to the US and increasing demand from sectors such as renewable energy, electric vehicles (EVs), and AI data centers [2][9]. - **Supply Disruptions Impacting Aluminium**: Aluminium prices have increased by 8% month-on-month due to robust demand and supply disruptions, including partial output disruptions at Century Aluminum's smelter in Iceland and potential power supply issues at South32's Mozal smelter in Mozambique [3][9]. - **China's Production Ceiling**: China's production ceiling of 45 million tonnes for aluminium, combined with low inventories and strong investments in the grid and EV demand, supports a positive outlook for aluminium [3][6]. - **Gold ETF Inflows**: Gold ETFs saw record inflows of USD 8.7 billion in the week ending October 22, leading to a rally in gold prices, although prices have since moderated due to profit booking [5][9]. - **Long-term Outlook for Construction Materials**: While the current demand for construction materials is lukewarm, the long-term outlook remains positive, contingent on the execution of supply-side reforms and earnings improvements [6][9]. Additional Important Insights - **China's 15th Five-Year Plan**: The plan emphasizes upgrading traditional industries and accelerating developments in new sectors, which may lead to policy changes aimed at tackling excess supply and boosting demand [4][9]. - **Price Forecast Adjustments**: Recent adjustments to price forecasts for metals reflect current market fundamentals, with copper and cobalt receiving the most significant upgrades due to supply disruptions [2][9]. - **Commodity Price Trends**: The report includes detailed commodity price trends, showing fluctuations in prices for various metals, including copper, aluminium, and gold, with specific percentage changes over different time frames [10][11]. Conclusion - The conference call highlights a complex landscape for the metals and materials industry, characterized by resilient demand, significant supply disruptions, and evolving policy frameworks in China. The focus on aluminium as a preferred investment reflects the current market dynamics and future potential in the sector [6][9].