The Non-ferrous metal industry is at the upstream end of the industrial chain. Many of the important industries in the national economy (real estate, construction, automobile, household appliances, electric power equipment, etc.) are downstream, which makes the operation of the Non-ferrous metal industry closely related to the national economy as a whole, showing a very strong cyclical. Due to its unique physical and chemical properties, Non-ferrous metal are mined and processed into various raw materials for use in various production activities leading to the formation of end consumer goods. Non-ferrous metal refers to all the metals except iron, chromium and manganese, among which aluminium has a wide range of applications and a strong consumption attribute, and the growth rate of consumption is closely related to the macro economy, both in terms of growth rate and application scope, than any other base metal. Under the goal of carbon neutrality, it is one of the important ways to reduce carbon emission by controlling the energy consumption and the total amount of electrolytic aluminum. The supply elasticity will be further weakened by restricting the new production capacity of electrolytic aluminum and eliminating the backward production capacity. The new energy sources on both the power side and the power generation side in China are conducive to the growth of aluminum consumption with greater intensity. Aluminum industry chain is the process of converting bauxite into alumina by Bayer process or sintering process, and then using alumina as raw material to produce primary aluminum by high temperature molten salt electrolysis process. After adding alloy elements into electrolytic aluminum, it is processed into aluminum profiles, sheets, strips and foils by extrusion and rolling, which is widely used in real estate, automobile, packaging, electric power and other fields. The aluminum industry chain has two characteristics: the Bauxite is almost the only raw material to produce alumina (only the nepheline used in Russian aluminum Achinsk alumina plant) , the alumina is the only raw material to produce electrolytic aluminum; More than 90% of the world's alumina is produced by Bayer process or alkaline process, and all of the primary aluminum is produced by molten salt electrolysis process.

Aluminum industry chain upstream aluminum industry chain upstream for "bauxite-alumina-electrolytic aluminum" , the production of raw materials for aluminum processing. Bauxite is the most abundant metallic element in the Earth's crust. According to the U.S. Geological Survey, global bauxite reserves range from 55 billion to 75 billion tons, with a base of 30 billion tons. At 370 million tons a year, it can be mined for at least 80 years, is a mineral rich in reserves, resource constraints are very small. Bauxite is concentrated, with the top five countries -- Guinea, Australia, Vietnam, Brazil and Jamaica -- accounting for 72 per cent of global reserves. China accounts for only 3 per cent of the world's bauxite reserves, but 20 per cent of its annual output. In terms of regional distribution, bauxite is mainly distributed in Guangxi and Guizhou in southwest China, and in Henan and Shanxi in central China. Aladdin, an aluminium industry consultancy, reckons that China's bauxite mines have only eight years of static support, based on annual consumption of 100m tonnes of domestic bauxite, 90 per cent of mine recovery and 10 per cent of mine dilution. 1. ALUMINUM OXIDE: China is the world's largest producer of aluminum oxide. According to the International Aluminum Industry Association, global production of aluminum oxide totaled 134 million tons in 2020 and 132 million tons in 2019, up 1.41 percent year-on-year. With domestic bauxite resources and overseas ore imports, China has become the world's largest producer of alumina, with its share of global production increasing from 13 per cent in 2005 to 54 per cent in 2019, alumina production rose from about 8.5 m tonnes in 2005 to 70.353 m tonnes in 2020. The cost of alumina accounts for 40% of bauxite, 17% of caustic soda, 19% of energy and 76% of all three. Bauxite accounts for the largest proportion, but also the largest difference between the cost of each plant, bauxite procurement costs determine the cost of alumina plant. In the case of global excess alumina supply, alumina production capacity in Shanxi and Henan has become the global alumina marginal cost production capacity, which basically accounts for 20% of the end of the cost curve. This requires that alumina production in Shanxi and Henan can not be fully produced, once it reaches full capacity, the world is in excess of alumina. 2. Aluminium Oxide, electricity and carbon anode account for 81% of the production cost of aluminium electrolysis, which is the source of cost difference among Aluminium electrolysis enterprises. To obtain a low electricity price, aluminum smelters must either look for areas with low grid electricity prices or build enterprise-owned power plants in areas with low coal prices. Therefore, the general direction of domestic electrolytic aluminum production capacity migration is to find the price depression. In the past two years, the capacity expansion of electrolytic aluminum mainly took place in Inner Mongolia, Yunnan and Guangxi, especially Yunnan, with the low-cost hydropower of 0.25 yuan per degree, becoming the main growth area of electrolytic aluminum capacity in the future. According to figures from Shanghai nonferrous and company announcements, China's planned supply capacity of electrolytic aluminum in 20212022 is 3.143 million tons per 2.9 million tons, of which replacement capacity is 1.07 million tons per 2.63 million tons, the actual planned net increment in 2021/2022 was 2.073 million tons/170,000 tons. Based on 42.56 million tons of built-up capacity at the end of 2020, it is expected to reach 44.8 million tons of ceiling capacity by 2022. Larger capacity planned for 2021/2022 has been a price suppressor on the supply side of previous market expectations. As indicators are becoming more and more scarce, integrating indicator resources, activating idle capacity and transferring indicators trapped in environmental capacity to suitable locations will become the main focus of the electrolytic aluminum industry in the next two years. 2021-2022 planned production capacity of Electrolytic Aluminum (unit: 10,000 tons) :

Second, the middle reaches of the aluminum industry chain: The middle reaches of the aluminum industry chain are aluminum processing, and the aluminum ingot as raw material is produced through such processes and processes as melting and casting, rolling, extruding and surface treatment, etc. , plate, strip, foil and other flat rolled and cast materials and other types of aluminum. Aluminum processing enterprises in the middle part of the industrial chain generally adopt the pricing model of "aluminum ingot price + processing fee" to earn stable processing costs. At present, China's die-casting industry concentration is low, most of the small-scale enterprises. According to China Foundry Association statistics, there are more than 3000 domestic die-casting enterprises, but only a few dozen enterprises in the output of more than 10,000 tons, the overall size of a decentralized pattern. There are few lithium foil projects under construction, mainly including 50,000 tons for Dingsheng Xincai, 40,000 tons for Dongyang and UACJ, 35,000 tons for Yunlu and 16,800 tons for Nanshan aluminum. As the project goes into production, global capacity is expected to increase from 92,400 tonnes in 2019 to 237,200 tonnes in 2023.

3. Aluminum industry chain downstream: Automotive Lightweight trend of the downstream demand for aluminum year-round 6%-7% steady growth, showing strong anti-cyclical attributes. According to Mysteel statistics, the construction industry is the largest downstream application area of aluminum in China, accounting for 33% . The aluminum industry downstream demand overall performance is more stable, the annual growth rate maintained at 6%-7% level. In recent years, the aluminum used in transportation, represented by the light-weight aluminum used in automobile and the light-weight aluminum used in rail transit, will be the main direction of product structure upgrading in China's aluminum industry.

Under the drive of energy-saving and emission-reducing policies and the acceleration of electrification, the vehicle lightweight is accelerating, among which the chassis lightweight is becoming a new blue sea, the penetration rate of aluminum battery box, sub-frame, control arm and steering knuckle is increasing, at the same time, hot-formed body parts also began to be applied on a large scale. At present, the most mainstream lightweight materials for high strength steel and aluminum alloy materials, 2021 steel and aluminum alloy will occupy more than 85% of the automotive lightweight market, aluminum alloy accounted for nearly 65% . As for the chassis, top is the domestic industry leader, in addition to FAW Group's FAW group, as well as the steering knuckle part of the Leading Enterprise Bethel; as for the battery box, Ling Yun shares as the country's largest supplier of automotive metal parts, the technology of body parts is leading in China, while huayu automobile is the largest comprehensive supplier of parts and components in China. 4. Aluminum industry chain environmental risk the biggest environmental risk of aluminum industry chain is red mud: the production of 1 ton of alumina will produce 1-2 tons of solid red mud, with strong alkaline, there is no mature treatment program, can only stockpile, red Mud reservoir leakage or collapse has occurred many times at home and abroad, resulting in the closure of enterprises. Aluminum is also the most energy-intensive base metal, requiring at least 4 tons of standard coal to produce 1 ton of electrolytic aluminum. At the same time, aluminum has many characteristics, such as low density, high strength, corrosion resistance and so on, which can reduce energy consumption in the following application process. The aluminum and steel industries share certain economic characteristics, downstream demand depends on real estate infrastructure, high cost of smelting restart, low concentration of rolled products, high dependence on ore, high global output, high assets and liabilities, and certain degree of export dependence. Some of these characteristics make aluminium and steel very similar in terms of investment. With the implementation of the last round of supply-side reform, the extensive and rapid expansion of the industry has come to an end. In 2020, domestic capacity/output CR5 of electrolytic aluminum increased to 49.9%/51.9% . Carbon peak in the background of aluminum supply ceiling more stable, related carbon emissions policy may raise the cost per ton. In both traditional and new infrastructure areas, such as 5G base stations, big data centers, artificial intelligence, UHV, new energy vehicles, new energy charging piles, intercity high speed rail and Rail Transit, and Industrial Internet, aluminum is widely available, and the industry has shown strong consumer resilience. 

Source: In depth industry research

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