Jiangsu aluminum downstream research - stable demand, low profit
March 26, 2025
Jiangsu Aluminum downstream research main conclusions: Industry status: Almost most of the demand of several aluminum alloy enterprises investigated is from the automotive industry (accounting for more than 70%). At present, the competition is fierce, the traditional order is reduced, the new entrants are more, and the processing profit is low. The volume of automobile orders is small, scattered, and the upward cost pressure is large. The orders are concentrated in large factories, and the docking customers are all first-level Oems, which ensure the overall stability of orders by recycling past outsourcing orders (the orders of small outsourcing factories are reduced). The requirements of the downstream Oems are very demanding, and the need to follow up the research and development of parts before the establishment of cooperation requires large capital investment and the risk of failure.
Demand: The demand for aluminum alloy in Jiangsu is highly dependent on the automobile industry, especially the new energy automobile industry. From the feedback of individual enterprises, the order situation is generally stable. Rhythmically, after the Spring Festival there was a short period of volume, but there are certain signs of weakening demand in the near future. Globally, margins are squeezed downstream because terminals are trading price for volume (car prices are falling), and margins are squeezed again because of competition from a large number of new entrants. However, from the perspective of aluminum demand, the total demand for terminal price reduction in exchange for price and state subsidies is increasing. At the same time, because the aluminum processing industry still has advantages over the traditional profit of the building materials industry in the current period and the long-term prospect is better to get the government policy tilt, there is a large number of new production capacity, so the indirect demand for aluminum is increasing (the order of the processing plant is stable or declining). It is more due to the loss of share by other companies).
Investment advice: In the case of supply constraints and stable demand, aluminum ingot inventory is performing well, especially recently there are signs of accelerating to the warehouse. In the entire consumption season node, we believe that aluminum prices are supported, you can consider volatility operation, the direction is more recommended to buy on dips. However, due to the low growth rate of electrolytic aluminum demand throughout the year, while the demand even in the peak season is not very optimistic, many primary aluminum profit margins are very low, so we do not recommend that the first half of the aluminum price is too high, can be appropriately lowered to make more profit point, and if the aluminum price quickly pulled up to 21500 near and above the point, we think may have been relatively close to the short range.
