20260512-招银国际-Aluminium_A_prolonged_supply_deficit_even_assuming_the_end_of_Iran_war_8页_946kb

Summary of Document: Aluminium Market Outlook and Investment Recommendations

Core Content

The document provides an analysis of the global aluminium market, highlighting the impact of the Iran war on supply and demand dynamics, and outlines investment recommendations for specific companies.

Main Points

• Supply Deficit and Price Outlook:
  The global aluminium supply deficit is expected to widen to 2% of global demand in 2026E, up from the previous estimate of 1.1%, even with slower global GDP growth due to the Iran war.
  The aluminium price is forecasted to rise 15% YoY in 2026E and remain elevated in 2027E as the deficit persists, though it will narrow.

• Supply Disruptions in the Middle East:

  • The production in the Gulf-Cooperation Council (GCC) and Iran is expected to decline significantly due to the Iran war.
  • GCC production is forecasted to drop by 24% YoY in 2026E, reducing output by 1,477kt.
  • Iran's production is expected to drop to ~350kt in 2026E, with potential further reductions due to broader supply disruptions and economic sanctions.
  • The full resumption of production in the GCC could take up to 18 months, and the impact of the war on Iran is expected to be long-term.

• Demand Forecast Adjustment:

  • The IMF has revised down the global GDP growth forecast for 2026E to 3.1%, leading to a trim in global aluminium demand.
  • Global demand is expected to grow by 0.6% in 2026E, 1.9% in 2027E, and 2.1% in 2028E.
  • China's demand growth is projected to be 0.4% in 2026E, down from 0.9%, while ex-China demand growth is expected to be 1% in 2026E, down from 1.5%.

• Investment Recommendations:

  • The document recommends buying shares of China Hongqiao (1378 HK) and Chuangxin Industries (2788 HK), citing the supply deficit as a positive for aluminium prices.
  • It also extends coverage to Hongqiao Holdings (002379 CH) with a BUY rating and a target price of RMB29, based on a 13.2x 2026E P/E ratio, which is a 20% premium to the target multiple for China Hongqiao.

Key Information

Global Supply and Demand Forecasts

Year	Global Supply (kt)	Change% YoY	Global Demand (kt)	Change% YoY	Supply Deficit (kt)
2026E	73,199	-0.8%	74,697	0.6%	-1,499
2027E	75,407	3.0%	76,135	1.9%	-728
2028E	77,715	3.1%	77,751	2.1%	-36

Impact of Middle East Disruptions

• GCC Production:

  • Total production is expected to decline by 1,477kt in 2026E.
  • Full restoration of production is projected to take 9 months for Alba and Qatalum, and 18 months for EGA's Al Taweelah smelter.
  • Recovery is expected in 2027E and 2028E with increases of 426kt and 1,125kt respectively.

• Iran Production:

  • Iran's production is expected to drop to ~350kt in 2026E.
  • The production of IRALCO, the largest smelter, was disrupted in an attack, and the impact is expected to be long-term.

New Supply Outside the Middle East

• Ex-China New Supply:
  • Ex-China new supply is projected to be 1,185kt in 2026E, 1,576kt in 2027E, and 1,139kt in 2028E.
  • Indonesia remains the key source of new supply, but project commencement may be delayed due to unstable electricity supply.

Sector Valuation

Company	A Share Price	Market Cap (US$ mn)	2026E PE	2027E PE	2026E PB	2027E PB	Yield (%)
CHALCO-A	11.78	28,269	9.1	8.8	1.9	1.6	4.5
HONGQIAO-A	23.16	44,024	10.7	11.5	4.3	4.0	7.0
YUNNAN ALUM-A	31.28	15,824	10.1	8.6	2.3	1.9	4.1
TIANSHAN ALUM-A	16.49	11,134	9.4	8.1	1.9	1.7	6.5
SHANDONG NANSHAN-A	5.53	9,263	10.6	8.8	1.0	1.0	4.6
HENAN SHENHUO-A	31.12	10,209	8.1	7.7	2.0	1.7	5.6

Investment Recommendations

• China Hongqiao (1378 HK):

  • Maintained as a BUY.
  • Recent share price pullback is seen as a good entry opportunity.

• Chuangxin Industries (2788 HK):

  • Maintained as a BUY.

• Hongqiao Holdings (002379 CH):

  • Initiated with a BUY rating.
  • Target price of RMB29, based on 13.2x 2026E P/E ratio, which is a 20% premium to the target multiple for China Hongqiao.

Conclusion

The document highlights the prolonged supply deficit in the global aluminium market, driven by significant disruptions in the Middle East. It suggests that the deficit will persist into 2027E, supporting elevated aluminium prices. Investment in China Hongqiao and its subsidiaries is recommended due to their exposure to the supply deficit and potential for higher returns.