The Zhitong Finance App learned that Guotai Junan released a research report saying that domestic bauxite resources are becoming increasingly tight, import dependency is increasing, pricing power is shifting away, bauxite prices have been bullish for a long time, and profits in the bauxite industry are expected to increase. Under the trend of tight supply of bauxite and high prices, the advantages of smelting companies in resource-side layout may expand, which is expected to control costs and increase profits. It is recommended to focus on aluminum smelting enterprises in the Chinese aluminum industry with a high self-sufficiency rate in bauxite.

Guotai Junan's views are as follows:

The gap between domestic bauxite supply and demand widens in 2024, and bauxite prices tend to rise and fall easily.

It is expected that in 2024, domestic safety production and ecological protection policies will continue to restrict the commencement of bauxite mines. Domestic bauxite resources will become increasingly tight. A significant portion of bauxite demand will shift to imported mines, while the unit consumption of using imported mines to produce alumina is around 2.6, which is significantly higher than 2.3 for domestic mines, driving the growth rate of demand for bauxite to reach 9.5%. Guinea's and Australia's exports to China grew by 13.8% and 16.1%, respectively. The domestic bauxite supply and demand gap is expected to widen to -15.51 million tons in 2024, and bauxite prices will rise or fall easily.

Bauxite pricing power has been transferred out, and bauxite profit levels have increased.

As domestic bauxite reserves are gradually exhausted, the share of imported ore will increase further in the future. By 2025, it may reach 75%, and import sources will be further concentrated in Guinea. In 2025, imported ore from Guinea may account for 54% of China's total bauxite demand. The Guinean government owns part of the shares in domestic mining projects. The Guinean government has the will and ability to interfere with bauxite prices to obtain more economic benefits, and the level of bauxite profit is expected to increase.

Aluminum companies lay out bauxite resources to reduce costs and increase profits on the mining side.

Bauxite accounts for about 19% of the total cost of electrolytic aluminum. In order to guarantee the supply of raw materials and control costs, major domestic aluminum companies actively allocate bauxite resources. Hongqiao, China: Participates in Guinea's “Win Alliance” project. Every year, more than 40 million tons of bauxite are transported back to the country through the Boke Port to Yantai Port route, helping Guinea quickly become the world's largest bauxite exporter. China Aluminum: Construction of the Bofa mine in Guinea began in 2018. By 2022, Bofa mine produced 13.55 million tons of bauxite per year, increasing China Aluminum's bauxite self-sufficiency rate to 68%. Smelting companies with high bauxite self-sufficiency rates can mitigate the impact of rising bauxite prices and increase profits.

Risk warning: The operating rate of electrolytic aluminum fell short of expectations; bauxite supply release exceeded expectations; domestic economic growth fell short of expectations.