Citi(US:C)2026-02-13 02:18Summary of Key Points from the Conference Call on China's Aluminium Demand Industry Overview - The report focuses on the aluminium industry in China, specifically the demand dynamics and trends for 2025 and beyond, as tracked by the China Aluminium End-Use Tracker (CAET) [1][2][8]. Core Insights and Arguments - Aluminium Demand Growth: Implied aluminium demand in China grew approximately 4% year-over-year (y/y) in 2025, reaching an annualized estimate of ~51 million tonnes (Mt). This growth was primarily driven by decarbonisation-related end-use markets [2][8][19]. - Decarbonisation Impact: Demand linked to decarbonisation surged by ~18% y/y in 2025, supported by strong renewable energy installations, particularly in solar and wind sectors [8][10]. - Cyclical Demand Weakness: Traditional cyclical demand for aluminium has softened, particularly in late 2025, due to a decline in manufacturing and infrastructure fixed-asset investment (FAI) [3][9][10]. - K-Shaped Economic Recovery: China's economy is exhibiting a K-shaped recovery, where structurally strong sectors (renewables, EVs, energy storage) diverge from weaker traditional sectors (construction, manufacturing) [10][3]. - Future Outlook: Economists project a rebound in infrastructure and manufacturing FAI to approximately 6% and 5% y/y respectively in 2026, which could positively influence cyclical aluminium demand [3][10]. Additional Important Insights - Battery Energy Storage Systems (BESS): The BESS sector is becoming a significant contributor to aluminium demand, with output rising ~73% y/y in December 2025. Policy reforms are expected to accelerate project commissioning in 2026 [4][43]. - Transportation Sector: Transportation-related aluminium demand fell ~3% y/y in December 2025, but for the full year, it rose ~14% y/y, driven by a ~25% y/y increase in electric vehicle (EV) sales [22][23]. - Solar Installations Decline: Solar installations saw a ~40% y/y decline in December 2025, following a strong front-loading in the first half of the year. This was a significant factor in the overall softness in electrical-related aluminium demand [27][28]. - Consumer Durables: Demand for aluminium in consumer durables declined by ~2% y/y in December 2025, primarily due to weaker air conditioner output. However, medium-term prospects remain positive due to potential material substitution from copper to aluminium [42]. Conclusion - The aluminium industry in China is navigating a complex landscape characterized by strong decarbonisation-driven demand and weakening traditional cyclical demand. The outlook for 2026 appears cautiously optimistic, contingent on policy support and economic recovery in key sectors. The BESS sector is poised to play an increasingly important role in shaping future aluminium demand dynamics.