It is expected that by 2025, the more significant derivation of supply and demand contradictions will amplify the upward space for aluminum prices due to low inventory and expected growth in demand levels, with the potential for aluminum profit per ton to expand.
According to the Futu Securities app, Sinolink has released research reports stating that in 2025, the supply-side constraints will be more obvious, with solar power and electric vehicles driving the increase in aluminum consumption levels. The more significant derivation of supply and demand contradictions is expected to amplify the upward space for aluminum prices due to low inventory and expected growth in demand levels, with the potential for aluminum profit per ton to expand. Stable profits and cash flow lead to the valuation increase of the aluminum sector. It is recommended to pay attention to the whole industry chain layout and growing targets such as Aluminum Corporation of China (601600.SZ), Tianshan Aluminum Group (002532.SZ), Henan Shenhuo Coal & Power (000933.SZ), Yunnan Aluminium (000807.SZ).
Regarding copper, it is expected that the tight situation of copper mines will continue in 2025, with a significant reduction of implicit raw material inventory in 2024, making it difficult for raw materials to have much buffering in 2025. Supply tightness will provide strong support for copper prices, and the continued contribution of new energy to the global major consumption increment will give copper prices good upward elasticity. Under the expectation of raw material tightness, profits are expected to continue to tilt towards the resource end, so it is recommended to pay attention to companies with ore end guarantees.
Sinolink Securities' main points are as follows:
Aluminum: The industrial supply-demand mismatch continues to ferment, and the slope of aluminum price increase is becoming steeper.
The phase-wise supply-demand mismatch of alumina is expected to gradually ease in 2025. In 2024, risks on the resource end spanned the entire year, with domestic safety and environmental issues and overseas disturbances restricting the release of alumina plant capacity. Despite the high profits in the industry, 39% of alumina production capacity reduction remains difficult to recover due to insufficient ore supply. Meanwhile, investments are hindered by the large amount of capital needed, long construction periods, and a lack of stable sources of imported ore for alumina plant investment in ore line equipment upgrades. Currently, all new domestic alumina projects use imported ore, ensuring the cost and raw material support for new capacity realization. Global alumina production is expected to increase by 6.5 million tons in 2025, with overseas bauxite gradually realizing the increase. The alumina supply-tightness issue in 2025 is expected to ease, but the addition of alumina capacity is concentrated in the first half of the year, leading to a phase-wise supply-demand mismatch in ore supplies.
Due to the red lines on domestic production capacity and overseas constraints on electricity and costs, the growth rate of primary aluminum supply is expected to decline in 2025. Domestic electrolytic aluminum is further approaching the production capacity redline; the reduction from the European energy crisis is slowly recovering only in small amounts, while high electricity, accidents, and raw material prices are limiting overseas capacity growth even further. The long-term planning of overseas electrolytic aluminum capacity is extensive, but the actual implementation is slow. It is estimated that in 2025, global additional electrolytic aluminum production will be 0.54 million tons, and the alumina supply tightness will significantly ease, with the prospect of restoring electrolytic aluminum profits.
Primary aluminum will start a continuous destocking process, with increased demand leading to upward price space. In 2025, China's direct and indirect exports of aluminum elements to the USA are 0.84 million tons. In the optimistic/neutral/pessimistic scenario of higher tariffs imposed by the USA, it is estimated that the reduction in aluminum element exports will be 0.156/0.168/0.198 million tons respectively. The cancellation of export tax rebates has put short-term pressure on aluminum material exports, but the price difference between domestic and foreign markets, along with insufficient overseas aluminum processing capacity, is expected to restore profitability to aluminum material exports, balancing aluminum elements in the medium term. The main growth contribution in 2025 comes from new energy, countering the decline in aluminum used for real estate and the potential impact of higher tariffs imposed by the USA. With differences in supply and demand elasticity, primary aluminum will kick off a continuous destocking process, projecting a global balance of -0.63/-0.59 million tons in 2025/26. Low inventory levels and significant demand growth are expected to amplify the upward price space for aluminum.
Copper: Supply supports prices, demand-driven elasticity, copper prices see another surge.
The tight supply situation in the mining industry continues, with scrap copper remaining an important raw material supplement in 2025. It is estimated that the global incremental supply from 2024 to 2026 will be approximately 0.64/0.68/0.52 million tons respectively, but factors such as declining ore grades, accidents, power restrictions, may hinder the full realization of the incremental supply. With the expectation of a tight copper ore supply, the proportion of scrap copper flowing towards smelting is expected to remain high, driven by scrap exchange programs alongside growth in scrap volume, making scrap copper an important raw material supplement in 2025. However, the hidden inventory depletion in 2024 and the shortage of raw materials in 2025 will provide limited buffer. It is projected that global refined copper production will increase by 0.9 million tons in 2025, further widening the supply-demand gap in copper ore, and the smelting end still faces production cuts risk.
The impact of US tariffs is limited, while the cancellation of export tax rebates affects demand by 1.4%. In the case of higher tariffs imposed by the USA, under optimistic/neutral/pessimistic scenarios, the impact on total copper export consumption would be 0.009/0.011/0.025 million tons respectively. The negative impact of tariffs on copper consumption is earlier than the boost from infrastructure, with US tariffs mainly affecting copper prices indirectly through trade and consumption expectations. China has a significant demand for copper imports, with primary product exports accounting for a small proportion, and the overall impact of canceling export tax rebates is limited, estimated to affect demand by 1.4% according to SMM.
As the supply-demand gap widens, new energy continues to drive demand, pushing copper prices upwards. New energy continues to contribute significantly to global consumption growth, with constraints on refining copper due to limited incremental supplies from mines. The tight supply situation will provide strong support for copper prices. It is expected that the global electrolytic copper market will remain in a tight balance, with the supply-demand gap widening. The global balance is projected to be +7/-20 in 2025-26. If the demand side performs better than expected or resonates with macro trends, copper prices will have a good upward elasticity.
Risk warning
Unexpectedly high production resumptions in mines; unexpected decline in real estate demand; consumption below expectations.
