On November 5, Beijing time, the main aluminum oxide futures contract rose by over 4.00% during the day, now reported at 5107 yuan per ton.

According to SMM, as of October 25th, the total weekly import volume of bauxite in domestic ports was 3.7304 million tons, a decrease of 0.1693 million tons from the previous week; the weekly export volume of bauxite from the main ports in Guinea decreased by 0.398 million tons to 1.8103 million tons compared to the previous week's 2.2083 million tons, while the weekly export volume of bauxite from major ports in Australia increased by 0.0161 million tons to 0.9333 million tons. With the continuous tight supply situation of bauxite, prices have been steadily rising. By October 31st, the CIF price of Guinean bauxite rose to $82.5 per ton, an increase of $5.5 per ton from last Thursday.

On the overseas front, as of October 31, Western Australia's alumina FOB price remained at 693 yuan per ton, equivalent to about 5877 yuan per ton for mainstream domestic ports. This is higher than the domestic alumina price of 821 yuan per ton. The alumina spot import window remains closed.

The overseas aluminum oxide supply gap continues, with the fill price steadily rising. On October 25th, overseas traded 0.03 million tons of aluminum oxide at a fill price of $730 per ton.

Sealand Securities released research reports stating that in the short term, there is a risk of weakening demand for electrolytic aluminum and a further decrease in aluminum processing activity. Despite the impact of eco-friendly concepts on production restrictions, the expectation for future weakness still exists. It is still necessary to pay attention to the actual realization of demand, policy expectations, and macro changes.

In comparison, the fundamentals of alumina are stronger. Short-term bauxite supply remains tight, with shipments from Guinea yet to fully recover. Bauxite supply remains tight, driving continuous price increases for alumina both domestically and internationally. Companies with integrated operations will clearly benefit.

Long-term, the aluminum industry has limited long-term supply increments, while demand still has growth potential, the industry may maintain a high level of prosperity.

Leading company in alumina sector:

Chinahongqiao (01378): On October 30th, Chinahongqiao announced the financial performance of its main subsidiary, Shandong Hongqiao New Materials Company (responsible for its domestic business, including aluminum and alumina), in the first three quarters. In the first three quarters, Shandong Hongqiao New Materials Company had a net income of 15.8 billionllion RMB, a 141% year-on-year increase, with a net income of 5.9 billion RMB in the third quarter, a 37% year-on-year increase, and an 8% increase compared to the previous quarter. As Chinahongqiao holds 98.56% equity of Shandong Hongqiao New Materials, Citigroup estimates its net income in the third quarter to be 5.8 billion RMB. Combining with the net income of 9.2 billion RMB in the first half of 2024, Chinahongqiao's total net income has reached 15 billion RMB, accounting for 75% to 80% of Citibank's full-year forecast and Bloomberg consensus. Citigroup also believes that the actual net income for the third quarter may be higher than 5.8 billion RMB, as it includes contributions from the Indonesian bauxite business. The analyst at the bank holds an optimistic view on the strong performance of bauxite prices and expects Chinahongqiao to benefit from it.

Aluminum Corporation of China (02600): Around mid-October, HSBC Global Research released a research report stating that in September, the export volumes of steel/aluminum in China increased significantly by 26%/19% year-on-year, and metal prices such as aluminum rebounded recently with the improvement in market sentiment. Therefore, HSBC expressed in the report that with the rebound of base metal prices amidst the improvement in market sentiment, and the stronger performance of base metals in the peak season, there is still potential for further increase in aluminum prices. Considering the strong fundamentals, the institution is bullish on the overall scale of China's aluminum market.