Preface
Recently, the Shanghai Futures Exchange (hereinafter referred to as SFE) announced that the casting aluminum alloy futures (code: AD) will be listed on June 10, 2025. In the aluminum industry chain, another "family member" has entered the futures market, making the industry chain more complete and enabling enterprises and traders to more accurately select hedging targets to meet the delivery requirements when conducting hedging. This article takes the listing of the casting aluminum alloy futures this time to sort out the aluminum industry chain and explore the development prospects of the aluminum industry chain in the future.
Introduction to the aluminum Industry Chain
The aluminum industry chain, in simple terms, is the transmission path of bauxite - alumina - electrolytic aluminum - aluminum alloy - terminal. The initial raw material is bauxite. Its form is just as its name suggests, not much different from ordinary soil, and most of them are reddish in color. After a series of treatments, bauxite and caustic soda can be added to produce alumina (Bayer process). About 2.5 tons of bauxite are needed to produce one ton of alumina. (2) Alumina is melted at high temperatures and a small amount of cryolite is added. Electrolytic aluminum is obtained through the salt melting electrolysis method. To produce one ton of electrolytic aluminum, approximately 1.925 tons of alumina are required. Additionally, a large amount of electricity is consumed. On average, the electricity demand for producing one ton of electrolytic aluminum is 13,500 kW·h. (3) The downstream aluminum alloys of electrolytic aluminum can be divided into two types: wrought aluminum alloys and cast aluminum alloys. The grades of wrought aluminum alloys can be classified into 1-8XXX series, mainly in the forms of profiles, plates and strips, foils, etc., and are applied in real estate, automobiles, food packaging and other fields. Cast aluminum alloys, on the other hand, are divided into primary and recycled types based on the type of raw materials. The representative grade of primary aluminum alloys is A356. The representative grade of recycled aluminum alloy is ADC12, which is mainly used in automobiles, 3C electronics, home appliances, etc.
1.1 Bauxite
Global reserves and production: According to USGS data, among the bauxite reserves that have been explored in 2024, Guinea's reserves amount to 7.4 billion tons, accounting for 25% of the global reserves. Australia has reserves of 3.5 billion tons, accounting for 12% of the global reserves. Vietnam has reserves of 3.1 billion tons, accounting for 11% of the global reserves. Indonesia has reserves of 2.8 billion tons, accounting for 10% of the global reserves. China's reserves amount to 680 million tons, accounting for only 2% of the global total. This resource reserve is not outstanding. In terms of output, there is a slight difference. In 2024, Guinea's output was 130 million tons, accounting for 29% of the global output, still holding the top position. Australia's output is 100 million tons, accounting for 22% of the global output. China's output is 93 million tons, accounting for 21% of the global output and ranking third. The output of Brazil and Indonesia was 33 million tons and 32 million tons respectively, both accounting for 7% of the global output.
Exploitable years: The calculation method for exploitable years = explored reserves/annual output, so this is a dynamic indicator. As mentioned above, in 2024, China's bauxite reserves are not large, accounting for only 2% of the global total. However, China's output accounts for one fifth of the global total. Therefore, the exploitable lifespan of China's bauxite is approximately seven years. Compared with other countries that rank among the top in the world in terms of production, in 2024, Guinea's reserves were 7.4 billion tons and its production was 130 million tons. Therefore, the exploitable years would be as high as 57 years. Australia has reserves of 3.5 billion tons, an output of 100 million tons, and a exploitable life of 35 years, which is also much longer than that of China. Due to the current low output in Indonesia and Brazil, the exploitable years have reached 63 and 82 years respectively.
Import dependence: China ranks second in the world in bauxite production because of its huge demand for bauxite. As mentioned below, China's alumina, a downstream product of bauxite, accounts for a large proportion of production. Relying solely on domestic bauxite cannot meet the huge demand, so it is necessary to import bauxite from overseas to make up for this supply gap. As mentioned above, the exploitable period in our country is only seven years. Therefore, in recent years, our country's reliance on imported bauxite has been continuously increasing. According to Mysteel, in 2024, China's bauxite imports accounted for 63% of the country's total supply, with the majority of bauxite coming from imports. In April this year, this figure even exceeded 80%. The excessive reliance on imports has also made the supply of bauxite vulnerable to overseas factors, such as the unstable regime in Guinea leading to mining halts or heavy rain causing transportation disruptions.
1.2 Alumina
Global production pattern: According to USGS data, the global alumina output in 2024 will be 142 million tons, among which China's alumina output will be 84 million tons, accounting for as high as 60% of the global output. Australia's output is 18 million tons, accounting for 13% of the global output. Brazil's output is 11 million tons, accounting for 8% of the global output.
Alumina capacity changes: According to Mysteel data, since 2018, the capacity changes of alumina in China have basically maintained a rapid expansion trend, with only relatively slow capacity expansion in 2020 and 2024. As of April 2025, the built capacity of alumina in China was 112.1 million tons, representing a year-on-year increase of 6.86%. At the end of last year, statistics showed that the newly put into operation alumina production capacity in China in 2025 was 13.2 million tons. The situation is quite different in terms of the changes in global alumina production capacity. According to USGS data, the capacity of alumina increased by 0.71% year-on-year in 2024, but the year-on-year growth rate has been declining year by year since 2021. In 2025, there will be five new overseas production capacity projects put into operation, all concentrated in Indonesia, totaling 4.6 million tons, which is far behind that of China. Overall, in recent years, the expansion of alumina production capacity in China has far exceeded that of overseas markets, with the majority of newly built capacity coming from China.
China's leading alumina enterprises: (1) Aluminum Corporation of China (Chalco Group), the world's largest alumina supplier, produced 17.37 million tons of alumina in 2024, accounting for 20.3% of the global market share; (2) China Hongqiao Group (Weiqiao Group), with an annual alumina production capacity of 19 million tons in 2024, ranks among the top three in China. (3) Dongfang Hope Group, one of the major domestic alumina producers, focuses on technological innovation and capacity optimization; (4) Hangzhou Jinjiang Group (Sanmenxia Aluminum Industry), a benchmark enterprise that uses domestic bauxite for production. In addition, Wenfeng and Nanshan Aluminum Industry are also among the top in the alumina industry and are the main forces in building new production capacity this year.
1.3 Electrolytic aluminum
Global production pattern: According to USGS data, the global output of electrolytic aluminum will be 72 million tons in 2024. Among them, China's annual output is 43 million tons. There is no doubt that China's electrolytic aluminum output still holds the top position in the world, accounting for as much as 60% of the global output. Secondly, there is India, with an annual output of 4.2 million tons, accounting for 6% of the global output. The annual output of Russia and Canada is 3.8 million tons and 3.3 million tons respectively, both accounting for 5% of the global output.
Changes in electrolytic aluminum production capacity: According to Mysteel, China's electrolytic aluminum production capacity was in an expansion trend from 2017 to 2019, with a capacity as high as 50.1 million tons in 2019. After China's supply-side reform in 2016, the upper limit of electrolytic aluminum production capacity was set at 45 million tons. Since 2020, new capacity has been strictly controlled, and new projects must be replaced by closing old capacity in an equivalent or reduced manner. Therefore, in 2020-2021, the illegal production capacity in Shandong, Xinjiang and other places was eliminated, and the production capacity was transferred to hydropower rich areas such as Yunnan and Guangxi. In 2021, the production capacity of electrolytic aluminum dropped to 43.08 million tons. Subsequently, from 2022 to 2025, the production capacity of electrolytic aluminum grew slowly to around 45.5 million tons.
China's leading electrolytic aluminum enterprises: (1) China Hongqiao Group, the world's largest production capacity, has an electrolytic aluminum production capacity of 6.5 million tons per year (2024), accounting for 12% of the global market share and 18% of the domestic market share. (2) China Aluminium Corporation has a raw material self-sufficiency rate of over 70%. Its domestic electrolytic aluminium production capacity is 7.6 million tons per year, and its electrolytic aluminium output accounts for 16.3% of the domestic market share. (3) Tianshan Aluminum, located in Xinjiang, is renowned for its low cost. Its self-owned power plant covers 80% of the electricity demand. The cost per kilowatt-hour is 0.15 yuan lower than the industry average, and the cost per ton of electrolytic aluminum is saved by over 2,000 yuan. (4) Nanshan Aluminum Industry has completed the full-process layout of "thermal power - alumina - electrolytic aluminum - aluminum processing" within 50 square kilometers. Its transportation cost is only one-third of the industry average, and its core product, aviation plates, accounts for 60% of the domestic market share. (5) Yunnan Aluminum Co., LTD., relying on Yunnan's abundant hydropower resources, has a carbon emission per ton of aluminum that is only 20% of that of coal-fired power aluminum, thus obtaining the qualification for exemption from carbon tariffs in the European Union.
1.4. Aluminium Alloy
The downstream products of electrolytic aluminum are basically in the form of aluminum alloys, which are divided into wrought aluminum alloys and cast aluminum alloys. Among them, wrought aluminum alloys account for 30% of the total downstream output, while cast aluminum alloys account for 70%. Most of the wrought aluminum alloys exist in the form of profiles, plates and strips, foils, etc., and are mainly used in the manufacturing of doors and Windows, photovoltaic brackets, new energy vehicle bodies, etc. Among the cast aluminum alloys, over 70% are recycled aluminum alloys. The ADC12, the benchmark of the aluminum alloy futures to be listed on the Shanghai Futures Exchange, is the grade with the largest proportion among recycled aluminum alloys. It is mainly applied in automotive parts, rail transit castings, 3C electronics, etc. In recent years, as the economy entered a downward cycle, the real estate industry shrank rapidly and then maintained a downward trend, seriously dragging down downstream demand. The progress of infrastructure projects has not been smooth either. The growth rate of infrastructure investment has slowed down, which to some extent has also curbed the release of some downstream demand.
Meanwhile, under the support of national policies, new industries have flourished. Among them, the newly installed capacity of photovoltaic power has maintained a relatively high growth rate, and the penetration rate of new energy vehicles has continued to increase and has now exceeded 50%. Although the year-on-year growth rate of photovoltaic and new energy vehicles remains at a relatively high level, due to their small initial volume, the increment of total demand for aluminum is relatively limited.
2. Discussion on the Development Prospects of the Aluminum Industry Chain
Casting aluminum alloys have become the main force relying on the demand for recycling technology (policy guidance) and automotive die-casting (a major consumer, more resilient than real estate), while wrought aluminum alloys have maintained a stable share by benefiting from building upgrading (real estate transformation) and the expansion of new energy (photovoltaic, policy guidance).
The current situation of the industry: Overall, the current situation of China's aluminum industry chain can be summarized as follows: The exploitable years of bauxite are extremely low, and the dependence on imports is increasing - the capacity expansion of alumina is too fast - electrolytic aluminum belongs to a high energy consumption and high carbon emission industry - the demand from traditional terminals is shrinking.
Export policy adjustment: In December last year, China abolished the export rebate policy for aluminum products, which led to a contraction in the export profits of China's aluminum products. Since last year, some countries such as the European Union and ASEAN have ruled that China's aluminum products violated their anti-dumping laws and imposed additional import tariffs on aluminum products from China, weakening the price advantage of China's aluminum product exports. From January to November 2024, the export performance of aluminum products was outstanding. However, due to the constraints of domestic and overseas policies, the export performance dropped rapidly in December, and the export performance from January to April this year remained weak.
Future development prospects: To intensify efforts in energy conservation and carbon reduction, adopt practical and effective measures, and make every effort to achieve the binding targets for energy conservation and carbon reduction during the 14th Five-Year Plan period, on May 29, 2024, The State Council issued the "Action Plan for Energy Conservation and Carbon Reduction from 2024 to 2025" (hereinafter referred to as the "Plan"). The Plan mentions that (1) We should accelerate the construction of transmission channels for large-scale wind and photovoltaic power bases, enhance cross-provincial and cross-regional transmission capacity, speed up the transformation of distribution networks, and increase the carrying capacity of distributed new energy. (2) Strictly implement the capacity replacement of electrolytic aluminum, strictly control the new capacity of copper, alumina and other smelting, and vigorously develop the recycled metal industry. By the end of 2025, the proportion of recycled metal supply will reach over 24%, and the proportion of direct alloying of molten aluminum will increase to over 90%. (3) New and expanded electrolytic aluminum projects must reach the benchmark level of energy efficiency and the A-level level of environmental protection performance. The energy efficiency of new and expanded alumina projects must reach the advanced value of the mandatory energy consumption limit standard. By the end of 2025, the proportion of capacity above the energy efficiency benchmark level in the electrolytic aluminum industry will reach 30%, and the proportion of renewable energy usage will exceed 25%. Energy conservation and carbon reduction, 2025 is not the end but the beginning. The electrolytic aluminum industry chain is a high energy-consuming industry with considerable carbon emissions. Therefore, environmental protection policies will only become increasingly strict in the future. At present, the capacity of alumina is expanding rapidly and is already in a state of overcapacity. In the future, it is bound to follow the supply-side reform in 2016 and eliminate some capacity. The increase in the proportion of molten aluminum will lead to a significant reduction in aluminum ingots, which will be replaced by aluminum alloy ingots or aluminum alloy rods, thereby reducing the secondary energy consumption of aluminum processing plants in remelting aluminum ingots.
The COVID-19 pandemic in 2020 accelerated the economy into a downward cycle, and the real estate market was sluggish. The demand for traditional aluminum products, aluminum profiles, dropped significantly. Previously, a survey was conducted on some aluminum processing plants. One of them stated that the order volume of profiles had decreased by at least one-third compared to before. Coupled with the overseas sanctions on profiles, plates and strips, photovoltaic brackets, etc., the export situation was unlikely to improve. The traditional downstream products of aluminium are facing the predicament of weak domestic demand and difficult exports.
Therefore, the launch of casting aluminum alloy futures by the Shanghai Futures Exchange at this time is of great significance, indicating the policy orientation for the transformation of the aluminum industry. Vigorously promoting cast aluminum alloys, represented by ADC12, and increasing the proportion of scrap aluminum can effectively alleviate the situation of overcapacity. Meanwhile, during the downturn of the real estate market, automobiles, as another major consumer good, have remained more resilient than real estate. Especially with the vigorous development of the new energy vehicle market, in the future, cast aluminum alloys will become the main force of downstream aluminum demand relying on recycling technology and the demand for automotive die-casting. However, deformed aluminum alloys such as profiles and sheet strips need to rely on building upgrades or real estate transformation and the expansion of new energy industries, such as photovoltaic, to maintain a stable market share. Overall, the development of aluminum alloys is both a policy orientation and an inevitable trend for the future.
