The Zhitong Finance App learned that Capital Securities released a research report stating that China's magnesium resources and production rank first in the world, providing a solid raw material guarantee for downstream magnesium applications. Magnesium alloy formwork generally uses the integrated molding process of the die-casting process. The industry's production technology routes are unified, and the degree of standardization of magnesium formwork is high, supporting large-scale applications. The application of magnesium formwork is currently in its infancy, but the market has reached a general consensus on magnesium alloy materials and the application prospects of magnesium formwork, and state-owned and private enterprises are gradually entering this field.Significant amounts of magnesium formwork will be released in 2023.

Recommended targets: Multiple projects will soon be put into operation, Yunhai Metal (002182.SZ), a leader in the magnesium industry with high growth; zirconium-based materials have laid a solid foundation, and magnesium materials have opened up room for growth (603663.SH).

▍ The main views of Capital Securities are as follows:

Environmental protection and other factors have limited the use of wooden building formwork, and metal plates are the general trend to replace wooden formwork.

Currently, wood formwork accounts for about 50% of the domestic building formwork market, and aluminum formwork accounts for about 30%. Wooden formwork has been restricted by local governments due to problems such as serious waste of resources. In contrast, metal formwork has high turnover times, is environmentally friendly, has high carrying capacity, almost no loss, and has economic advantages such as high reusability rate, low amortization costs, high construction efficiency, and labor cost savings. In the future, metal formwork will replace wooden formwork as a general trend.

The price of magnesium has declined from a high level, and the production cost of magnesium formwork is already lower than that of aluminum formwork.

The high magnesium price level fell sharply in 2022. The decline was far higher than the price of aluminum, and the magnesium-aluminum ratio returned to a normal range. Each ton of magnesium can make about 60 square meters of building formwork, while aluminum can make about 40 square meters. Taking into account raw materials, processing, die-casting, etc., the production cost of magnesium building formwork is lower than that of aluminum formwork.

According to estimates of the magnesium price of 22,000 yuan/ton and the aluminum price of 18,500 yuan/ton, using the die-casting process, the production cost of magnesium building formwork is 570 yuan/square meter, while the production cost of aluminum building formwork is 610 yuan/square meter. With the widespread application of magnesium, amortization of die-casting molds and other units has been reduced, and die-casting technology advances, there is still room for future production costs to drop drastically.

The lightweight, alkali resistance, and die-casting performance of magnesium templates are superior to aluminum, and “magnesium substitute aluminum” has broad prospects.

Magnesium alloy templates are superior to aluminum alloy templates in terms of weight reduction, alkali resistance, and die-casting performance. Magnesium alloys are alkali-resistant and do not stick easily to cement, while aluminum alloys are cement-philic, and the post-maintenance cost of magnesium formwork is lower than aluminum. The magnesium density is lower than aluminum. The magnesium alloy template is about 16 kg per square meter, which is about 5-9 kg lighter than the aluminum alloy template, making it easy for workers to carry. Magnesium alloy has better fluidity than aluminum, is less corrosive to moulds, has a long mold life, and can die-cast thin-walled parts, and its die-casting performance is superior to aluminum.

Looking ahead to the full life cycle, leasing or selling magnesium formwork is highly profitable.

Based on estimates of 100%, 90%, and 80% of the average rental price of aluminum formwork, the gross margin level of magnesium formwork leasing is higher than 45%; based on estimates of 100%, 90%, and 80% of the average sales price of aluminum formwork, the gross margin level of magnesium formwork sales is higher than 28%;

Compared with aluminum formwork, when magnesium formwork manufacturers transfer part of their profits to downstream enterprises, leasing or selling at 20% off, their profitability is still considerable, exceeding or close to the gross margin level of aluminum formwork.

The technical path was unified and the supply of raw materials was sufficient. The magnesium template entered its first year of use in '23.

China ranks first in the world in terms of magnesium resources and production, providing a solid raw material guarantee for downstream magnesium applications. Magnesium alloy formwork generally uses the integrated molding process of the die-casting process. The industry's production technology routes are unified, and the degree of standardization of magnesium formwork is high, supporting large-scale applications.

The application of magnesium formwork is currently in its infancy, but the market has reached a general consensus on magnesium alloy materials and the application prospects of magnesium formwork. State-owned and private enterprises are gradually entering this field, and magnesium formwork will be significantly released in 2023.

Risk warning:

The price of magnesium has fluctuated sharply; the price ratio of magnesium and aluminum has risen sharply; the construction industry is weak.