Wisdom Finance APP has learned that Minsheng Securities issued research reports stating that due to reasons such as declining grade and resource exhaustion, domestic bauxite production is unlikely to increase. Overseas bauxite has a high dependence on Guinea resources, but Guinea's political environment is uncertain, and factors such as marine transportation have led to the instability of overseas bauxite supply. Overall, the attribute value of bauxite resources is worth paying attention to. In addition, due to disturbances in the supply of domestic and foreign ores, alumina production has limited room for improvement. Looking at the fourth quarter, the volume of Guinean bauxite reaching the port will decrease significantly in September and October due to the impact of the rainy season. The operating rate of alumina companies will be affected to a certain extent. In addition to the environmental protection season, restrictions on production in some regions, the tight supply and demand situation of alumina is unlikely to change.

The main points of the Minsheng Securities report are as follows:

Domestic bauxite is concentrated in distribution, with a decline in grade.

Guangxi, Henan, Guizhou, and Shanxi, these four provinces (regions) account for more than 90% of the total national reserves. Among them, Guangxi has the highest proportion, with reserves of 202.6872 million tons in 2022, accounting for 30% of the total national bauxite reserves. With the continuous exploitation of Chinese bauxite, the reduction of high-grade ore reserves, the overall ore grade is declining. From the perspective of alumina content and A/S ratio (aluminum-silicon ratio), the alumina content of Shanxi and Henan ores has slightly decreased since 2021, and the A/S ratio of ores in various regions has also decreased, leading to an increase in ore consumption in the alumina production process, and the amount of bauxite required to produce one ton of alumina has increased accordingly.

Since 2019, the domestic bauxite production has been continuously declining.

In 2023, the national bauxite production is approximately 65.52 million tons, a year-on-year decrease of 3.4%, ranking third globally, only after Australia and Guinea. The main bauxite producing areas in China include Shanxi, Henan, Guizhou, and Guangxi, with the four provinces accounting for about 94% of the national bauxite production. Among them, the mines in Shanxi and Henan have been largely shut down due to safety and environmental issues, and resumption of production is slow, with almost no new mining projects added on the supply side. The approval time and process are long, and actual production faces significant challenges. Additionally, affected by natural disasters such as floods, disturbances affect bauxite production.

Focus on the attributes of bauxite resources.

Minsheng Securities expects a bauxite gap of 4.85 million tons in 2024. On the one hand, domestic bauxite production has not been able to recover as scheduled, leading to a tight spot supply. On the other hand, the shipment of Guinean bauxite is disrupted by multiple factors, and the import increment has not met expectations. In the long term, domestic bauxite production is unlikely to increase due to factors such as declining grade and resource depletion, while overseas bauxite has a high dependence on Guinean resources. However, overseas political uncertainties, marine transportation, and other factors have led to inadequate stability in the overseas bauxite supply. Overall, the attributes of bauxite resources are worth attention, with relatively high domestic bauxite costs, and the future bauxite price center is expected to gradually rise.

Short-term tight supply and demand of alumina, with no long-term risks.

Constrained by disturbances in domestic and foreign ore supplies, the increase in alumina production is limited. Looking at the fourth quarter, Guinean bauxite shipments will drop significantly in October due to the rainy season, affecting the operating rates of alumina enterprises. Coupled with partial regional environmental restrictions during the environmental protection season, the tight supply and demand of alumina is difficult to change. However, in the long term, with the gradual commissioning of new capacities at home and abroad and the easing of disturbances in ore supplies, alumina production will gradually increase. In addition, as the demand side nears the aluminum electrolysis capacity ceiling, the growth space of alumina demand is limited, and alumina will gradually move towards a relatively surplus situation.

Key recommended symbols: Aluminum Corporation of China (601600.SH), Chinalco (01378), Tianshan Aluminum Group (002532.SZ), Yunnan Aluminium (000807.SZ), Shandong Nanshan Aluminium (600219.SH).

Risk Warning: Lower-than-expected downstream demand for aluminum, unexpected release of overseas bauxite production, and unexpected production cuts in Yunnan.