Dongwu Securities: Domestic cycle convergence compounded overseas costs and upward dividend returns became the core pricing anchor for the aluminum industry
The Zhitong Finance App learned that Dongwu Securities released a research report saying that looking ahead to 2026, the investment side suggests focusing on high dividend targets that will increase the share of the electrolytic aluminum business in the future, thereby amplifying profit margins and further increasing the dividend ratio. 1) The bank believes that, based on the fact that the global interest rate cut cycle is still not over, and the simultaneous recovery of the global economy and the different constraints on domestic and foreign supply, there is room for aluminum prices to rise. 2) The bank believes that 2025 will be a turning point for Chinese electrolytic aluminum companies to further increase their dividend ratio. Yearly, electrolytic aluminum companies will complete the transformation from cyclical stocks to dividend assets.
The main views of Dongwu Securities are as follows:
From a medium- to long-term perspective, the current market fully prices expectations for the expansion of overseas electrolytic aluminum production capacity & contraction of aluminum companies' profitability, and is concentrating on selling electrolytic aluminum equity assets. The bank believes that there are three key differences in expectations
Expectation gap 1: Overseas supply restrictions for bauxite are being strengthened, and the “low price guarantee” pattern of alumina is not stable, and integrated enterprises need to be given a “concentrated premium”: as overseas ore production increases and domestic alumina production capacity completes structural transformation (from inland to coastal), the bank believes that with 1) Guinea's claims that it will plan to further reduce bauxite exports to support prices based on domestic alumina digestion capacity, compliance records, and resource retention The goal is to control mining side releases year by year. The rise of “national resourcism” on the mining side requires the capital market to give “concentrated premiums” to integrated enterprises.
Expected difference 2: The growth rate of overseas electrolytic aluminum supply is being squeezed by electricity demand. Overseas aluminum companies' complete cost center shift will limit overall production capacity investment progress: As a high-energy metal, it usually takes about 10 to 20 years to build a long-term stable and low-cost electricity contract for about 10 to 20 years to build an aluminum factory with economic conditions overseas. Now that AI demand is growing on a large scale, data centers are willing to bear higher electricity prices while consuming large amounts of electricity. In February 2026, Century sold the Hawesville aluminum plant to data infrastructure company TeraWulf and transformed the site of the high-power aluminum factory into an AI/HPC data center to utilize its original high-capacity electricity. According to the bank's 2026 Q1 calculation, the full cost of Century Aluminum, Alcoa, and Alro is about 3614, 3204, and 3010 US dollars/ton, respectively. Some centers are already higher than the current LME aluminum price level of 3,200 US dollars/ton.
Expected difference of 3: China's electrolytic aluminum production capacity restrictions are still effective, and aluminum companies' profits are expected to break the cyclical reincarnation: the “Special Action Work Plan to Clean Up and Rectify Illegal Projects in the Electrolytic Aluminum Industry” jointly issued by the National Development and Reform Commission and the Ministry of Industry and Information Technology in 2017 first proposed a “45 million ton production capacity ceiling” with rigid restrictions on electrolytic aluminum, and finally sorted out the formed domestic electrolytic aluminum compliance production capacity “ceiling” of 45.43 million tons/year. As of June 2026, China's electrolytic aluminum production capacity still reached 45.209 million tons. Subject to restrictions, taking into account 2026 The year is the peak year for the replacement of old and new production capacity, and some non-compliant overproduction will not exist for a long time. On a global level, the rapid deployment of new production capacity in Indonesia & restoration of damaged production capacity in the Middle East, the bank estimates that the 2027-2028 overseas supply growth rate will be about 11.49%/7.91%, and the global supply growth rate will be about 4.51%/3.31%; considering the recovery of demand in the domestic photovoltaic and automotive sectors and the further recovery of the global manufacturing industry, it is estimated that global demand growth will remain high for a long time. Global supply and demand will maintain a tight balance between 27-28, and China's smelting side will maintain a high level of profit for a long time.
From a short-term perspective, the bank still believes that based on the following three impressive factors, aluminum prices have the momentum to rise steadily at 26H2
Factor 1: The copper-aluminum price ratio has fluctuated in the 2.5-4.5 range since supply-side reforms in 2017-2018. Against the backdrop of strong supply constraints, the bank believes that the current trend of substituting aluminum to copper supply continues. The current price ratio of copper to aluminum (2026.6) (4.2) means that aluminum prices are more driven by rising copper prices. As a result, the electrolytic aluminum industry is expected to enjoy the double dividends of increased demand brought about by “aluminum instead of copper” and profit barriers created by the rigidity of its own electricity costs.
Factor 2: As the Middle East conflict destroyed a large amount of stable electrolytic aluminum supply and production capacity, as of July 24, 2026, overseas LME stocks had dropped to 275,000 tons. After excluding 95,000 tons produced after April 13, 2024 that did not comply with LME delivery rules, the actual deliverable portion was less than 180,000 tons (the lowest in history). On this basis, as of May 2026, the spot volume of aluminum in the Midwest of the United States had reached 2,513 US dollars/ton. The spot lift of aluminum ingots in Japan had reached $620 per ton per ton in the third quarter. per ton; At the same time, with the correction of domestic aluminum prices, China's aluminum ingot bank formed a rapid dewarehousing trend in June-July (more than 500,000 tons have been removed since May). Global aluminum ingots have fallen to a low level, and aluminum prices have a basis for a steady upward trend at 26H2.
Risk warning: Market competition intensifies; geopolitical risks; metal prices fall short of expectations.