In search of certainty targets in the wake of a major shake-up in non-ferrous metals: Aluminum core asset CHINAHONGQIAO (01378) "looking back at the bull" to seize the opportunity?

Last week, precious metals experienced a thrilling "high dive". On January 30, silver plunged sharply, achieving the largest single-day drop since 1980; gold also fell by over 10% in a single day, similarly setting a record for the largest daily drop in decades. On the surface, the huge fluctuations in gold and silver are related to the statements made by US President Trump on social media, where he announced his intention to nominate a hawkish former Federal Reserve board member, Kevin Warsh, as the next Federal Reserve chairman. Following this news, the US dollar rebounded, US bond yields rose, and global liquidity tightening expectations increased. In an overbought environment, precious metals that had just experienced rapid increases also experienced significant pullbacks. The author believes that this is a typical market "knee-jerk reaction": traders are quickly pricing in a more hawkish monetary policy future. However, despite the apparent huge shifts in asset prices overnight, for astute investors, after market sentiment is released, this could be an excellent opportunity to identify high-quality assets and reallocate to assets with long-term trends. Taking aluminum as an example, a metal with unique toughness and strong growth logic, the supply constraints and continuous demand growth in place may further expand the scissors gap, meaning that secondary market assets represented by CHINAHONGQIAO (01378) will continue to be favored by funds. From a trading perspective, this round of adjustments in precious metals, especially in silver, may prompt speculative funds to shift towards electrolytic aluminum, which has stronger long-term growth potential and certainty. Market "knee-jerk reaction", electrolytic aluminum remains strong Trumps nomination of Kevin Warsh to lead the Federal Reserve triggered a series of chain reactions. Despite the dark clouds hanging over global capital markets for a time, GMTEight believes that, especially at times like these, rational investors need to ignore macro "noise" and focus more on the industry's fundamentals and investment logic in the medium term. In the last week of January, the price of alumina fell by 0.57% to 2635 yuan per ton; in terms of electrolytic aluminum, Shanghai aluminum rose by 4.89% to 25,300 yuan per ton, while the price of London aluminum fell by 1.39% to 3132 US dollars per ton. Unlike the roller-coaster trend in gold and silver prices, the prices of alumina and electrolytic aluminum remained relatively stable. Undeniably, macro-level disturbances in news may have a short-term impact on the price of aluminum and other industrial metals. However, when it comes to the decisive factors determining price centers supply and demand relationships the negative impact of macro disturbances is minimal. On the supply side, domestic electrolytic aluminum operating capacity has long been close to the ceiling, while overseas projects are progressing slowly. According to statistics from Shanghai Aladdin Biochemical Technology Co., Ltd, overseas planned electrolytic aluminum capacity exceeds 20 million tons, with projected new capacities in 2025 and 2026 standing at 640,000 and 2.37 million tons respectively. Among them, Indonesia has the most planned capacity of 12.25 million tons, with estimated new capacities in 2025 and 2026 being 330,000 and 1.32 million tons respectively, accounting for over half of the new capacity overseas. However, due to constraints in power supply, several companies including Rio Tinto, South32, and Century Aluminum have had planned capacities that have been unable to materialize or delayed, indicating high uncertainties in the commissioning of overseas electrolytic aluminum capacities. On the demand side, it is clear that in recent years, the acceleration of "new infrastructure" represented by ultra-high voltage has significantly driven the growth of aluminum consumption. Additionally, combined with the continuous setting of historical highs in copper prices, the process of "aluminum replacing copper" in areas such as air conditioning and other home appliances is accelerating, injecting new momentum into aluminum demand growth. Furthermore, the policy of replacing old consumer goods with new ones is expected to continue until 2026, which will also significantly support the demand for electrolytic aluminum. In conclusion, considering the continuous unexpected downstream demand for aluminum in recent years, coupled with supply constraints domestically and internationally, it is likely that the overall electrolytic aluminum market will maintain a tight situation by 2026, making aluminum prices prone to rise with difficulty falling, with the strong continuing to be strong. The aluminum industry's upward trend remains unchanged, and the growth certainty and resilience of CHINAHONGQIAO's core assets are worth looking forward to. Considering both aspects, the recent adjustment in the non-ferrous metals market presents an opportunity for investors to position themselves in aluminum industry core assets represented by CHINAHONGQIAO, creating a rare "golden opportunity". For aluminum companies, the long-term competitive advantage of the entire industry chain is the core competitiveness. CHINAHONGQIAO's unique "aluminum-electricity integration" and "upstream-downstream integration" industrial cluster development model largely safeguards and amplifies its cost advantage. On one hand, CHINAHONGQIAO strategically established upstream bauxite mining in 2014, and currently achieves a self-sufficiency rate of 100% in alumina production; the company also owns self-owned power plants and transmission networks, with a power self-sufficiency rate of over half, particularly benefiting from reduced electricity costs during periods of falling coal prices. In addition, in response to the trend of "Northern Aluminum Moving South" for green development in recent years, CHINAHONGQIAO has gradually moved its production capacity to Yunnan, further controlling the cost of electricity. On the other hand, most of the company's downstream customers are within a 50-kilometer radius, resulting in short sales radius and strong pricing power; meanwhile, in response to the trend of large-scale and large-scale electrolytic aluminum industry, the company continues to invest in upgrading aluminum electrolytic cell technology, actively developing recycling aluminum, deeply involved in the development of lightweight vehicles, and creating new growth points. In summary, considering the continuous unexpected downstream demand for aluminum in recent years, and supply constraints both domestically and internationally, it is likely that the overall electrolytic aluminum market will maintain a tight situation by the end of 2026, making aluminum prices prone to rise with difficulty falling, meaning that the strong will continue to be strong.