The growth rate of aluminum exports is relatively stable, mainly concentrated in the two countries. China's aluminum export market is accompanied by the rapid growth of the electrolytic aluminum market. The compound growth rate reached 20% in 2011-2016. In 2017, China exported 4.79 million tons of aluminum and exported US$13.9 billion. In recent years, aluminum exports accounted for 13-15% of primary aluminum production. China's aluminum exports are concentrated in Vietnam (profiles) and the United States (plate and foil), accounting for 15% and 14% respectively.
The double-reverse policy has a certain impact on short-term exports. The current round of US government tax on imported aluminum is subject to a 10% tax. Considering that the current direct import ratio in the United States is 13%, it is estimated that the impact on China's aluminum export profit will be about 160 million US dollars, accounting for 1.1% of total exports, directly affecting aluminum plates. Strip exports are the mainstay, with an impact of around 360,000 tons. However, considering the gap in the supply of aluminum in overseas markets, China needs to export aluminum materials for replenishment. If strict restrictions on exports will increase the shortage of overseas.
The increase in energy costs + the narrowing of domestic and international spreads, and the decline in the advantages of low processing fees. The cost of aluminum is mainly composed of primary aluminum cost and processing cost. Since 2016, domestic coal prices have risen sharply due to supply-side reforms, pushing up the cost curve of the electrolytic aluminum industry. When domestic and international prices have narrowed, the export profit margin has also decreased, especially the low-end, low-value alternatives. Aluminum products, the proportion of high-end products in the future is expected to increase.
Technical advantages and domestic alternative companies have significant benefits. With the market space contraction caused by double-reverse and the exit of small and medium-sized processing enterprises, the market environment is expected to improve, and the profitability of companies with technology and cost advantages is expected to increase. At the same time, companies with production capacity in the automotive sheet, aviation aluminum and other industries are expected to benefit from domestic substitution and continue to enjoy the industry dividend.
Earnings forecast and valuation: Maintain industry coverage of corporate earnings forecasts and target prices.