Aluminum prices are expected to remain strong under tight supply. We recommend electrolytic aluminum companies that have the advantage of scale, low cost, and growth potential.
The Zhitong Finance App learned that Haitong Securities released a research report stating that domestic social inventories of aluminum ingots declined month-on-month. As of December 21, 23, LME aluminum, SHFE aluminum, and COMEX aluminum inventories were 50.82, 11.20, and 44,800 tons respectively, changing +10.6%, -6.9%, and +27.2% respectively from the end of November. Domestic social inventory of aluminum ingots was 446,000 tons, a decrease of 152,000 tons from the end of November. The bank believes that aluminum prices are expected to remain strong under tight supply, so the bank recommends electrolytic aluminum companies with scale advantages, low cost, and growth potential, focusing on Yunlu (000807.SZ), China Aluminum (601600.SH), Shenhuo (000933.SZ), Tianshan Aluminum (002532.SZ), China Hongqiao (01378), etc.
The views of Haitong Securities are as follows:
The cost side supports the price of aluminum, and the profit of electrolytic aluminum smelting is still impressive.
According to Wind data, as of December 22, 2023, the domestic SHFE aluminum price was 192,000 yuan/ton, with a monthly increase or decrease of +3.0%. The price of LME aluminum was 2,324 US dollars/ton, and the monthly increase or decrease was +5.9%. According to SMM data, as of December 22, 2023, the cost of electrolytic aluminum was 16,300 yuan/ton, up about 0.4% from the end of November. The price was supported by rising smelting costs, while the smelting profit of aluminum mills remained high at 2,818 yuan/ton.
Supply side: Upstream feedstock side events may affect the supply of electrolytic aluminum.
According to SMM data, China's operating capacity rebounded to 42 million tons in December, an increase of 110,000 tons over the end of November. The operating rate for that month was 92.9%. According to SMM research, an explosion and fire broke out at a large fuel depot in Conakry, Guinea last week on December 18, which limited fuel sales, and production and delivery of some bauxite mines will be affected to a certain extent.
Demand side: Production and sales of new energy vehicles continue to grow, and the real estate completion side supports demand positively.
Production and sales of new energy vehicles showed significant restorative growth, which is expected to drive demand for automotive aluminum. According to data from the China Association of Automobile Manufacturers, sales of new energy vehicles in China in November 2023 were 1.026 million units, up 7.32% month on month and 30.47% year on year. According to data from the National Bureau of Statistics, from January to November 2023, the cumulative value of the completed real estate area in China was 652 million square meters, up 17.9% year on year; of these, the monthly completed area in November increased 10% year on year.
Inventory: Domestic social stocks of aluminum ingots decreased month-on-month.
As of December 21, 2023, LME aluminum, SHFE aluminum, and COMEX aluminum inventories were 50.82, 11.20, and 44,800 tons respectively, changing +10.6%, -6.9%, and +27.2% respectively from the end of November. Domestic social stocks of aluminum ingots were 446,000 tons, a decrease of 152,000 tons from the end of November.