The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the weight of real estate pricing in consumption has been diluted by new energy sources, and real estate completion is declining. Without changing the domestic electrolyzed aluminum gap of 1 million tons, it is difficult to stop the upward trend in aluminum prices and profit improvement. Since February 5, the Shenwan Aluminum Index has continued to rebound, rising 25%. The decline in the aluminum sector since Q4 last year, caused by concerns about the completion of real estate, is being repaired by rising aluminum prices. Aluminum prices are progressing steadily and are proving that the pattern of aluminum supply and demand will not change as real estate completion deteriorates. The 2025 gap+weak dollar pattern will push aluminum prices to historic highs, and the investment value of the aluminum sector should be paid attention to as soon as possible.

CITIC Construction Investment's views are as follows:

The weight of real estate pricing in consumption has been diluted by new energy sources.

From 2000 to 2020, the compound growth rate of China's electrolytic aluminum production reached 13.4%. As a variety dominated by domestic sales, such a high growth rate benefited from economic development, especially the urbanization process. At one point, the proportion of aluminum used in real estate was close to 30%, then gradually transitioned to 25%. However, after the rapid rise of aluminum used in NEVs and photovoltaics in 2021 and a drop of more than 15% in real estate completion in 2022, the downstream aluminum consumption structure in 2023 has been optimized to 22% for transportation, 21% for power electronics, 20% for construction, 10% for packaging, 10% for exports, 8% for durable goods, 7% for equipment, and 2% for others. The share of real estate has declined, and the weight in aluminum pricing has also been diluted.

Real estate completion is declining. Without changing the domestic electrolytic aluminum gap of 1 million tons, it is difficult to stop the upward trend in aluminum prices and improving profits.

In 2023, China produced 41.74 million tons of electrolytic aluminum and consumed 43.2 million tons. The 1.46 million ton gap was filled by 1.39 million tons of imports and 70,000 tons of inventory. Real estate will decline by 14% and 20% in 2024 and 2025, respectively. Since transportation and power electronics are still developing rapidly, it is not difficult for domestic aluminum consumption to grow by 2%-3%. Under this growth rate, the domestic electrolytic aluminum gap in 2024 and 2025 was 1.14 million tons and 1.7 million tons, respectively. From January to February 2024, domestic production of electrolytic aluminum was 6.84 million tons, with a net import of 470,000 tons. The surface demand was 6.97 million tons. The cumulative year-on-year increase was 16.1%, exceeding expectations, and firmly promoted the steady rise in aluminum prices from 18,500 to 19,500.

The aluminum sector is rectifying, and its investment value will eventually be seen due to the steady rise in aluminum prices.

Since February 5, the Shenwan Aluminum Index has continued to rebound, rising 25%. The decline in the aluminum sector since Q4 last year, caused by concerns about the completion of real estate, is being repaired by rising aluminum prices. Aluminum prices are progressing steadily and are proving that the pattern of aluminum supply and demand will not change as real estate completion deteriorates. The 2025 gap+weak dollar pattern will push aluminum prices to historic highs, and the investment value of the aluminum sector should be paid attention to as soon as possible.

Risk analysis: The global economy has declined sharply, and consumption has shrunk in a cliff-style manner. US inflation got out of control, the Federal Reserve's monetary tightening exceeded expectations, and a strong dollar suppressed the price of equity assets. Consumption growth in the domestic new energy sector fell short of expectations, and consumption in the real estate sector continued to be sluggish.