Outstanding Performance, Listed Aluminum Companies “Happy” To Achieve High Growth
In the first half of 2024, aluminum listed companies collectively ushered in "both volume and price increase", and nearly 80% of aluminum companies achieved double growth in revenue and net profit. Many brokerages believe that under the combined effect of upstream raw material supply constraints and the continued growth in terminal new energy aluminum demand, the high prosperity of the aluminum industry is expected to be maintained.
According to Dongcai Choice statistics, as of August 28, 18 A-share aluminum listed companies have announced their performance in the first half of 2024. Among them, 14 companies achieved positive year-on-year net profit growth. In the first half of the year, the 18 aluminum companies that have disclosed their performance achieved a total operating income of 127.444 billion yuan, a year-on-year increase of 14.13%, and a total net profit attributable to shareholders of 11.315 billion yuan, a year-on-year increase of 34.16%, revealing a signal of industry recovery.
In the first half of the year, affected by the increase in demand and the contraction of upstream raw material supply, the prices of aluminum industry chain products such as alumina, electrolytic aluminum and aluminum ingots rose overall. Several securities firms have pointed out that the continuous optimization of the supply and demand structure of the upstream bauxite market and the continuous increase in aluminum demand in downstream terminal applications will push the aluminum industry to continue its high prosperity.
Aluminum product price recovery
According to Shanghai Nonferrous Network data, since 2024, domestic alumina prices have continued to rise under the constraints of tight aluminum ore supply. From 3,119 yuan/ton at the beginning of the year to 3,903 yuan/ton in June, the cumulative increase in the interval exceeded 25%.
Under the transmission of the rise in alumina prices, the prices of electrolytic aluminum and aluminum ingots also rose to varying degrees in the first half of the year.
According to Zhuochuang Information (37.060, -0.94, -2.47%) data, since the beginning of the year, the price of electrolytic aluminum has risen from 19,400 yuan/ton to 20,200 yuan/ton in June, with an interval increase of about 4.12%. In terms of the average transaction price, the average transaction price of domestic electrolytic aluminum reached 19,800 yuan/ton from January to June, an increase of 1,300 yuan/ton from 18,500 yuan/ton in the same period last year, a year-on-year increase of 7.03%.
According to Antaike's calculations, from January to June 2024, the weighted average full cost of China's electrolytic aluminum, including tax, was about 17,000 yuan/ton, an increase of 112 yuan/ton from the same period last year, a year-on-year increase of 0.7%. However, benefiting from the upward trend in electrolytic aluminum prices, the average profit of electrolytic aluminum in the first half of the year was about 2,803 yuan/ton, an increase of about 8% from the same period last year.
At the same time, according to the quotation of the Shanghai Nonferrous Market, the average price of domestic aluminum ingots in the first half of the year was about 20,300 yuan, an increase of 1,093.27 yuan/ton from the same period last year, a year-on-year increase of 5.7%. According to Antaike's calculations, in the first half of the year, the average profit margin of the aluminum ingot industry was about 2,818 yuan/ton, a significant increase of 1,211 yuan/ton from the same period in 2023, a year-on-year increase of 75.4%.
Driven by rising product prices, aluminum listed companies have delivered impressive results in the first half of the year. On August 16, China Hongqiao released its semi-annual operating performance report. The company achieved operating income of 73.592 billion yuan in the first half of the year, an increase of 11.95% year-on-year; the company's shareholders' attributable profit was 9.155 billion yuan, an increase of 272.66% year-on-year.
On August 20, Tianshan Aluminum (6.330, -0.10, -1.56%) disclosed its semi-annual report. The company achieved operating income of 13.785 billion yuan in the first half of the year and realized a profit attributable to the parent of 2.074 billion yuan, an increase of 103.45% year-on-year; in the second quarter alone, the company realized a net profit attributable to the parent of 1.354 billion yuan, an increase of 161.97% year-on-year. Nanshan Aluminum (3.580, -0.03, -0.83%) disclosed that in the first half of the year, the company achieved operating income of 15.667 billion yuan, an increase of 8.05% year-on-year, and a net profit attributable to the parent of 2.189 billion yuan, an increase of 66.68% year-on-year. Among them, the company achieved a net profit of 1.338 billion yuan attributable to the parent company in the second quarter, a year-on-year increase of 68.51%.
On August 26, Yunnan Aluminum Co., Ltd. (11.600, -0.19, -1.61%) released its semi-annual report. The company achieved operating income of 24.648 billion yuan in the first half of the year, a year-on-year increase of 39.49%, and realized a net profit of 2.519 billion yuan attributable to the parent company, a year-on-year increase of 66.26%. The company's net profit attributable to the parent company in the second quarter was 1.355 billion yuan, a year-on-year increase of 115.08%. In addition, Aluminum Corporation of China (6.460, 0.00, 0.00%) expects the company to achieve a net profit of 6.5 billion to 7.3 billion yuan attributable to the parent company in the first half of the year, a year-on-year increase of 90% to 114%.
Regarding performance growth, China Hongqiao said that in the first half of the year, the company's alumina business continued to improve, and the increase in alumina profits created important value for the company's business growth. Nanshan Aluminum said that the prices of aluminum ingots and alumina powder rose sharply in the first half of the year due to market influence. Tianshan Aluminum also disclosed that the company's average external sales price of alumina in the first half of the year increased by about 26.1% year-on-year, of which the operating performance of the alumina segment increased by 108073.6% year-on-year.
Cost reduction
Under the combined influence of supply contraction and demand growth, the aluminum industry chain as a whole ushered in "both volume and price increase" in the first half of the year. In addition to product prices and sales volume, the decline in raw material prices on the cost side in the first half of the year also increased the operating performance of listed aluminum companies to a certain extent.
Nanshan Aluminum pointed out in its semi-annual report that in the first half of the year, the purchase prices of bulk raw and auxiliary materials required for the company's production all declined to a certain extent. From the perspective of cost structure, the production cost of electrolytic aluminum is mainly composed of alumina, electricity costs and prebaked anode costs.
According to Zheshang Securities (10.990, 0.06, 0.55%), at present, the cost of alumina in the electrolytic aluminum cost profit model accounts for the highest proportion, about 42%; followed by electricity costs, accounting for about 32%, and prebaked anode costs accounting for about 12%, and the three items together account for more than 85%.
In terms of the proportion of raw materials, each ton of electrolytic aluminum requires about 1.92 tons of alumina, 0.47 tons of prebaked anodes and 13,500 kWh of electricity. Among them, the cost of power generation is closely related to the fluctuating price of coal. Specifically, the power generation of each ton of thermal coal is expected to be about 3,000 kWh, and each ton of electrolytic aluminum is expected to require 4.5-5 tons of coal. Based on this calculation, when the price of coal drops by 100 yuan, it is expected to bring 450-500 yuan of cost reduction space for electrolytic aluminum.
In this regard, Tianfeng Securities (2.630, 0.24, 10.04%) Securities stated that since the first quarter of 2024, aluminum prices have been in an upward cycle, coupled with the downward trend in the cost side, the net profit attributable to the parent of listed electrolytic aluminum companies has mostly increased significantly year-on-year. Among the five core sampled electrolytic aluminum listed companies, the net profit attributable to the parent of three A-share electrolytic aluminum companies (China Aluminum, Yunnan Aluminum Co., Ltd., and Tianshan Aluminum) increased by more than 20% year-on-year. Among them, Tianshan Aluminum is the stock with the largest year-on-year growth among electrolytic aluminum companies. The main reason is that aluminum prices are in an upward cycle, and the downward trend in thermal coal and prebaked anode prices has led to an increase in aluminum profit per ton.
Zheshang Securities said that in the first half of the year, the production costs of electrolytic aluminum companies fell sharply year-on-year, mainly due to the continued decline in the average prices of prebaked anodes and thermal coal. Affected by coal prices, coal-fired power prices and prebaked anode prices are both at low levels.
The prosperity is expected to continue
In 2023, aluminum supply and demand are in a tight balance. On the one hand, the structural transformation of aluminum demand has contributed to the core increment of new energy demand; on the other hand, the slow expansion of electrolytic aluminum production has formed constraints on the supply side. With the high-level game of alumina, the upward shift of alumina not only brings cost support to electrolytic aluminum prices, but also brings high performance elasticity to companies selling alumina. Therefore, Zheshang Securities expects that by 2025, aluminum prices are expected to start a strong trend similar to that in 2021.
Statistics show that by the end of 2023, China's total bauxite reserves will be 710 million tons, accounting for about 2.39% of the world's bauxite resources; in 2023, the global bauxite production will be about 400 million tons, of which China's annual bauxite production will be 93 million tons, accounting for 23.3% of the world's total bauxite production. Compared with the proportion of reserves, China's bauxite production is relatively high.
On the supply side, the contraction trend of bauxite has continued in recent years. Dongxing Securities (8.110, 0.08, 1.00%) statistics show that from 2020 to 2023, the average annual compound growth rate of bauxite production was about -11%. From January to May 2024, China's bauxite production fell by 20% year-on-year to 22.76 million tons.
Affected by domestic supply constraints, bauxite imports have increased year by year in recent years. Statistics show that from 2021 to 2023, the import volume of bauxite will be 107 million tons, 125 million tons and 142 million tons respectively, with an average annual growth rate of 15.2%. The proportion of imported bauxite in bauxite consumption will rise from 78.6% in 2021 to 86.1% in 2023.
Against the background of shrinking bauxite supply, the demand for alumina, electrolytic aluminum and aluminum products is still rising. Dongxing Securities analysis believes that the growth in demand for bauxite is not only due to the significant expansion of the global alumina industry, but also affected by the growth in terminal aluminum demand.
From the perspective of data changes, in the past decade, the global total alumina production capacity has increased by 87.8% to 188 million tons from 2014 to 2023, while the global alumina production has increased by 29.6% to 140 million tons during the same period.
Among them, China's alumina production capacity increased by 212.1% from 33 million tons in the same period to 103 million tons, and China's alumina production also increased from 47.8 million tons to 82 million tons, with a cumulative increase of 58.8% in the period. In terms of capacity share, China's alumina production capacity and output have accounted for 54.9% and 58.6% of the world respectively. The rapid expansion of the global and Chinese alumina industries has effectively driven a significant increase in the total demand for bauxite.
Calculated from the perspective of capacity, by 2023, the global annual consumption of bauxite will be about 376 million tons. Among them, China's annual consumption of bauxite is about 206 million tons; in the past ten years, the total demand for bauxite in the world and China has increased by 176 million tons and 140 million tons, respectively, an increase of 88% and 112%, respectively.
In downstream applications such as electrolytic aluminum and aluminum products, the development of new energy industry has become the core area driving the growth of aluminum demand.
According to data from the China Association of Automobile Manufacturers, in 2023, China's automobile production and sales will exceed 30 million vehicles for the first time. Among them, the cumulative sales of new energy vehicles reached 9.495 million, with a year-on-year sales growth of 37.9% and a market share of 31.6%, leading the global electric vehicle market.
Zheshang Securities said that the increase in the penetration rate of new energy in the automotive field and the development trend of lightweight body have driven the rapid growth of aluminum demand. It is expected that by 2025, the aluminum consumption in the new energy vehicle field will reach 4.75 million tons, and by 2030 it will exceed 10 million tons; at the same time, under the background of stable growth, new energy infrastructure is also expected to be strengthened, and the construction of photovoltaics and power grids will promote the increase in the proportion of aluminum used in the electronics and power industries. Taking the aluminum frame for photovoltaics as an example, as one of the indispensable auxiliary materials for photovoltaic construction, it is estimated that by 2025, the aluminum consumption of photovoltaic aluminum frames will reach 2.87 million tons. In the field of wind power, Zheshang Securities expects that 1.34 million tons of aluminum demand will be generated in 2025.
