Citi(US:C)2025-11-26 14:15Summary of the 2025 China Materials Tour: Meeting with SMM Aluminum Expert Industry Overview - Industry: Aluminum - Key Expert: Mr. Liu Xiaolei, Chief Aluminum Analyst at SMM Core Insights 1. Aluminum Deficit Forecast: China is expected to extend its aluminum deficit into 2026, with net imports estimated at approximately 2.5 million tons [1][2] 2. Aluminum Average Selling Price (ASP): The average selling price of aluminum is projected to rise to Rmb 21,200 per ton in FY26, compared to Rmb 20,800 per ton in the current year [1][3] 3. Supply Dynamics: - Domestic aluminum capacity is anticipated to increase from 43.9 million tons in FY25 to between 44.5 and 44.6 million tons in FY26 - Overseas aluminum capacity is expected to rise by approximately 500,000 to 600,000 tons in FY26, from 30.4 to 30.5 million tons in FY25 [2] - Global aluminum capacity is assumed to increase by 1 to 1.2 million tons in 2026 [2] 4. Demand Growth: Aluminum demand is estimated to grow by an additional 800,000 tons in 2026 [3] 5. Cost Structure: - The average cost of aluminum is around Rmb 16,000 per ton, with low-end and high-end aluminum costs at approximately Rmb 14,000 and Rmb 19,000 per ton, respectively [4] - The average cost is expected to remain on a downward trend, with limited downside potential of about Rmb 1,000 per ton [4] 6. Alumina Market: - Alumina is currently in a surplus situation, with a capacity of approximately 115 million tons per annum and a surplus level of about 4 to 5 million tons in 2025 [6] - Domestic alumina cost is around Rmb 2,778 per ton, while imported alumina from Indonesia is priced at approximately Rmb 2,800 per ton [8] 7. Demand Substitution Risks: There is a risk of demand substitution from steel and magnesium alloys due to high aluminum prices. A 10% increase in aluminum ASP could raise OEM costs by Rmb 200 to 400 per vehicle, which is considered manageable [5] Additional Important Points - The aluminum industry is currently experiencing attractive profit margins due to the supply-demand dynamics and cost structure [4] - The aluminum capacity cap of 45.5 million tons is not expected to be lifted in the next 2 to 3 years, indicating a continued tight supply environment [2]