Core Viewpoint - Rio Tinto and Chalco have entered into a definitive agreement to acquire a controlling stake in Companhia Brasileira de Alumínio (CBA) from Votorantim, aiming to enhance their presence in the low-carbon aluminium sector [1][3]. Group 1: Acquisition Details - The acquisition is structured as a joint venture, with Rio Tinto holding 33% and Chalco 67%, valuing Votorantim's 68.596% stake in CBA at approximately $902.6 million [1]. - A cash payment of 10.50 reais ($0.66) per share will be made, representing a 21.2% premium over the prior 20-day average trading price of CBA shares [2]. - Following the acquisition, the joint venture plans to initiate a mandatory tender offer for the remaining shares in CBA, as required by Brazilian legislation [2]. Group 2: Strategic Implications - The acquisition aims to leverage combined expertise in aluminium production to drive growth at CBA, particularly in the global low-carbon aluminium sector [3]. - CBA operates a comprehensive low-carbon aluminium operation in Brazil, supported by a 1.6GW renewable energy portfolio, including 21 hydropower plants and wind power installations [3]. - The acquisition aligns with Rio Tinto's strategy to extend its low-carbon, renewable-powered aluminium footprint in rapidly growing markets, while also providing opportunities to grow its bauxite and alumina supply chain in the Atlantic region [5]. Group 3: Operational Insights - CBA primarily serves the domestic market, with production activities that include three bauxite mines yielding around two million tonnes annually, along with an alumina refinery and an aluminium smelter [4]. - The partnership between Rio Tinto and Chalco is expected to combine operational excellence and innovation, creating value for shareholders, employees, customers, and local communities [6]. Group 4: Regulatory and Compliance Aspects - The transaction is subject to regulatory approvals and customary conditions [3]. - Plans for a delisting tender offer may coincide with the mandatory tender offer but could be reassessed after the acquisition is finalized [7]. - Rio Tinto and its affiliates may also engage in purchasing CBA shares outside the US during the pending tender offer period, in compliance with applicable regulations [7].

Core Viewpoint - Vedanta Ltd is set to undergo a significant demerger into five independent companies, with the aim of listing them on stock exchanges by May 2024, following the approval from the National Company Law Tribunal [2][3]. Group 1: Demerger Details - The demerger will create five distinct entities: Vedanta Aluminium, Vedanta Oil & Gas, Vedanta Power, Vedanta Iron and Steel, and Vedanta Ltd, which will manage the zinc and silver businesses [3][4]. - The demerger is scheduled to take effect on April 1, 2024, with shares expected to be listed by May or before the end of June [2][3]. Group 2: Debt Allocation - Vedanta's total net debt is approximately ₹60,624 crore (around $6.7 billion), which will be distributed among the new companies based on their asset values and cash generation capabilities [4][5]. - Vedanta Aluminium is expected to carry the largest portion of the debt, while Vedanta Oil & Gas and Vedanta Iron and Steel will have minimal to no debt assigned to them [6][7]. Group 3: Financial Performance - Vedanta reported a record quarterly profit of ₹7,807 crore for Q3, marking a 60% increase year-on-year, with revenues reaching ₹45,899 crore, a nearly 20% rise from the previous year [8][9]. - The company's EBITDA also reached a record high of ₹15,171 crore, reflecting a 33% increase compared to the previous year [8][9]. - The aluminium segment achieved its highest EBITDA margin of $1,268 per ton, driven by record production levels [10].

Aluminium Industry Conference Call Summary Industry Overview - The aluminium industry is facing significant supply constraints, leading to potential deficits not seen in over 20 years, with a bullish outlook for prices in the medium to long term [4][5][20]. Key Points Price Forecasts and Investor Positioning - Aluminium prices have increased by 30% since June 2025, with a forecast of prices needing to sustain above US$3,500 per ton to incentivize the additional supply of over 10 million tons required by 2030 [4][9]. - Price scenarios include a bullish forecast of US$4,000 per ton and a bearish scenario of US$2,800 per ton [7]. Supply and Demand Dynamics - China's aluminium supply is no longer growing, with production growth expected to plateau by 2027 due to policy constraints and environmental regulations [26][35]. - Indonesia is emerging as a potential supplier, but its capacity growth is expected to be limited to approximately 0.7 million tons per year, which is insufficient to meet global demand [43][46]. - The market is projected to face significant deficits by 2027, necessitating higher prices or technological breakthroughs in scrap recovery to balance supply and demand [13][20]. Demand Drivers - Structural demand drivers for aluminium include power infrastructure, data centers, robotics, batteries, and solar energy [68][69]. - The rise of AI and data centers is expected to significantly increase power consumption, competing with aluminium smelting for energy resources [71][75]. - The production of humanoid and non-humanoid robots is projected to require substantial amounts of aluminium, lithium, and copper, further driving demand [76][83]. Investor Sentiment and Market Positioning - There has been a notable increase in speculative positioning in the LME aluminium market, reflecting investor confidence in a cyclical recovery in demand [9][10]. - Concerns regarding geopolitical uncertainties and potential economic shocks could present buying opportunities for investors [11]. Risks and Challenges - Downside risks include potential shocks from Japan's debt situation, geopolitical tensions, and a slowdown in global industrial activity [11]. - The aluminium market is less responsive to price increases compared to copper, which may lead to more pronounced deficits and stockout risks [8][23]. Secondary Supply and Recycling - Secondary aluminium supply growth is expected but will be insufficient at current price levels, with recovery rates needing to rise significantly to meet market demands [52][53]. - Historical data suggests that without strong price signals, breakthroughs in scrap recovery are unlikely [54]. Conclusion - The aluminium industry is at a critical juncture, with supply constraints and rising demand driven by technological advancements and decarbonization efforts. The outlook remains bullish, but significant risks and challenges must be navigated to achieve a balanced market.

Summary of J.P. Morgan Aluminium Dashboard Industry Overview - **Global Aluminium Demand**: Increased by 2% year-to-date (YTD), with China showing a growth of 3% while the rest of the world (RoW) remains flat [1][1] - **China's Production**: Continues to hover just below the 45 million tonnes per annum (Mtpa) cap, with net imports of primary aluminium running at 2.5-3 million tonnes per annum [1][1] - **Global Inventories**: Visible inventories are approximately 1,170 kilotonnes (kt), remaining near decade lows, contrasting with rising copper inventories [1][1] - **Alumina Prices**: Down 53% YTD to $314 per tonne, positively impacting smelter margins, with the alumina/aluminium linkage at 11%, near historical lows [1][1] - **Aluminium Prices**: Up 11% YTD, but underperforming copper, which is up 25% [1][1] - **Midwest Premium**: Increased to a near-record ~$1,860 per tonne, close to 70% of the London Metal Exchange (LME) price, incentivizing imports after domestic stockpiles were largely depleted [1][1] - **Market Outlook**: The forward curve is in slight contango, with expectations of a surplus market over the next two years [1][1] Key Companies with Aluminium Exposure - **Overweight Recommendations**: - South32 (S32 AU) - Rio Tinto (RIO AU/RIO LN) - Norsk Hydro (NHY NO) - Press Metal (PMAH MK) [1][1] Future Price Projections - **2026/27 Base Metals Outlook**: Anticipates aluminium prices could reach $3,000 per metric tonne in the first half of 2026 due to higher copper prices and a balanced market, although significant supply growth from Indonesia is expected to undercut prices later in 2026 and beyond [2][2] - **Projected Surplus**: Forecasted surplus of 307 kt and 215 kt in 2026 and 2027 respectively [2][2] Financial Metrics of Key Companies - **Rio Tinto Ltd. (RIO AU)**: - Market Cap: $121.7 billion - EV: $140.1 billion - Price Target: $138.0 (3% upside) - EV/EBITDA: 5.9x for 2025, 5.6x for 2026 - PE: 13.8x for 2025, 12.8x for 2026 - Dividend Yield: 4.3% for 2025, 4.7% for 2026 [5][5] - **Norsk Hydro (NHY NO)**: - Market Cap: $13.9 billion - Price Target: $74.0 (3% upside) - EV/EBITDA: 5.5x for 2025, 5.3x for 2026 - PE: 12.7x for 2025, 10.8x for 2026 - Dividend Yield: 4.2% for 2025, 5.3% for 2026 [5][5] - **Press Metal (PMAH MK)**: - Market Cap: $13.1 billion - Price Target: $7.3 (10% upside) - EV/EBITDA: 17.4x for 2025, 15.6x for 2026 - PE: 25.5x for 2025, 22.9x for 2026 - Dividend Yield: 1.4% for 2025, 1.6% for 2026 [5][5] Global Production and Demand Summary - **China Aluminium Production**: Expected to increase from 35.8 Mt in October 2024 to 36.5 Mt in October 2025, a 2% increase [17][17] - **Global Aluminium Demand**: Projected to rise from 60.3 Mt in 2024 to 61.4 Mt in 2025, a 2% increase [17][17] Additional Insights - **Alumina Production in China**: Expected to rise from 79.8 Mt in 2023 to 83.7 Mt in 2024, with significant month-on-month increases anticipated [19][19] - **Global Market Dynamics**: The aluminium market is experiencing shifts due to varying production rates across regions, with China leading in both production and demand growth [19][19] This summary encapsulates the key insights and projections regarding the aluminium industry and specific companies, providing a comprehensive overview for potential investment considerations.

Summary of Key Points from the Aluminium Sector Conference Call Industry Overview - **Industry**: Aluminium Sector in China - **Outlook for 2026**: The market is expected to experience tightening supply against resilient demand, with aluminium prices projected to rise by 6% year-on-year, indicating a constructive outlook for prices and profitability [1][19][10]. Core Insights - **Supply Dynamics**: - China's production ceiling limits domestic supply growth to approximately 0.5% year-on-year in 2026, while overseas supply is expected to grow by 3% [2][52]. - The aluminium market is moving towards a tighter balance due to constrained supply and modest overseas additions, with a significant reliance on secondary aluminium and imports to meet domestic demand [13][14][52]. - Unplanned disruptions, such as reduced output at Century Aluminium's Iceland smelter and potential power supply instability at South32's Mozal smelter, contribute to supply tightness [2][64]. - **Demand Drivers**: - Demand growth in China is anchored by the electric vehicle (EV) sector and grid investment, with EV demand expected to grow by approximately 20% in 2026 [3][33]. - Grid investment, particularly in ultra-high voltage (UHV) transmission lines, is anticipated to provide a steady source of demand for aluminium [34]. - Despite a decline in solar installation intensity, the segment still contributes significantly to overall demand [3]. Financial Performance and Recommendations - **Company Ratings**: - Buy ratings maintained for China Hongqiao and Chalco, with target prices raised to HKD37.40 and HKD12.30 respectively [4][10]. - China Hongqiao offers an attractive valuation with a dividend yield of approximately 7% [4]. Price and Margin Expectations - **Price Projections**: - SHFE aluminium prices are expected to reach RMB22,000 per ton in 2026, reflecting a 6.4% year-on-year increase, while LME prices are projected at USD2,750 per ton [15][19]. - The margin environment is expected to improve due to lower raw material costs, with stable power tariffs and adequate supply of bauxite, alumina, and carbon anodes [22][29]. Additional Insights - **Structural Changes**: - The aluminium market is characterized by structural supply constraints rather than cyclical fluctuations, with China's capacity capped at 45 million tons [2][52]. - The global primary aluminium demand is projected to rise by 1.8% in 2026, while supply growth is limited to 1.6% [13]. - **Inventory Levels**: - Low inventories in both China and the global market indicate minimal buffer against supply disruptions, reinforcing the potential for price increases [14][19]. - **Long-term Trends**: - The shift towards electrification and the gradual substitution of copper with aluminium in various applications are expected to support long-term demand growth [33][35]. This summary encapsulates the key points discussed in the conference call regarding the aluminium sector, highlighting the interplay between supply constraints, demand drivers, and financial performance expectations.

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.