Goldman Sachs pointed out that the global aluminum market will also transition into a continuous supply shortage phase starting in the second quarter. The global aluminum market is expected to have a supply and demand gap of 7.24 million tons this year. This trend will support aluminum prices on the Lent Stock Exchange to reach 2,600 US dollars/ton by the end of this year. In this context, three current developments in the aluminum market are worth paying attention to:

First, the Chinese aluminum market has had the strongest trend so far this year.

Goldman Sachs expects China's aluminum demand to increase 11% year-on-year in the first quarter, similar to the copper market, mainly supported by strong investment in solar energy and power grids.

Under production capacity restrictions, China's domestic aluminum supply stabilized, driving strong growth in raw aluminum imports. Compared with 1.4 million tons in 2023, the main import volume has now reached 2.7 million tons per annualized, which indicates that the influence of the Chinese market on the global aluminum market is increasing.

Second, it is noted that there is growing evidence that demand for spot aluminum in Europe is picking up, with the exception of Germany. Inventory removal in most downstream sectors in southern and eastern Europe has ended, and order volume is increasing. This is reflected in the price of a liter of aluminum in Europe, which has risen nearly 40% from its December low.

Third, the Baltimore Bridge collapse this week is an important event for the US aluminum market. More than 10% of aluminum imports have to go through this port. The de-inventorized supply chain is likely to be forced to stock up more inventory ahead of time, especially given the improving trend in US terminal demand.

Goldman Sachs has noticed that the rise in aluminum in the Midwest region of the United States has shown an upward reaction, supporting an increase in some spot transactions.

Conceptual enterprises related to the aluminum industry:

China Aluminum (02600): The company's net profit after tax rose 60% year on year to 6.7 billion yuan last year, which is the median of Yingxi's forecast range, which means that net profit after tax fell 30% quarterly to 1.36 billion yuan in the fourth quarter of last year. The price of aluminum in China is 19,000 yuan per ton, and China Alcoa's gross profit per ton of aluminum this year is 3,000 yuan, benefiting from limited supply growth and lower costs of coal and anode carbon blocks. Bank of America Securities anticipates a 2% increase in aluminum demand in China this year, supported by investment in power grids, good growth in electric vehicles and light weight trends, offsetting the impact of the slowdown in real estate demand and photovoltaic demand growth.

Hongqiao, China (01378): The company's net profit to mother increased 32% year over year to 11.5 billion yuan, which is 24% higher than the bank's forecast, mainly due to the lower production cost of aluminum. Net profit for the second half of 2023 increased 950% year-on-year and 270% month-on-month to 9 billion yuan. Citi pointed out that due to lower coal and electricity costs, strong aluminum smelting profit margins will continue until 2024, and there is room for the company's consensus earnings to rise.