China Aluminum Sector: Excessive pessimism creates opportunities to accumulate

Research evidence excerpt

China Aluminum Sector: Excessive pessimism creates opportunities to accumulate

Global Research

6 July 2026ab

China Aluminum Sector Equities

ChinaExcessive pessimism creates opportunities to

accumulate Aluminum

Sharon Ding

Analyst

sharon.ding@ubs.com

China: aluminium capacity limit intact; valuation reset creates opportunities +852-2971 6284

China's 2017 supply-side reforms capped approved nameplate aluminium capacity at Elvis Liu

45.43mt. While record margins have driven modest overproduction via potline Associate Analyst

upgrades, deferred maintenance and parallel production, we expect output to rise to elvis.liu@ubs.com

45.6mt in 2026E and 46.0mt in 2027E (vs. 44.5mt in 2025), slightly above nameplate +852-3712 3052

capacity. However, we do not expect China to abandon the capacity cap and revert to Daniel Major

the unconstrained smelter expansion of 2009-17. Reflecting our moderately softer Analyst

aluminium price outlook and a less tight market, we cut our sector earnings forecasts daniel.major@ubs.com

10-30% for 2026-27 and our PTs c20%, based on unchanged target PE and dividend +44-20-7568 3472

yield assumptions. However, we think valuations remain compelling with our new PTs Timothy Handerson

implying 60-80% upside. Upside catalysts include ongoing inspections of Analyst

overproduction and potential closures of non-compliant capacity, Indonesian policy timothy.handerson@ubs.com

uncertainty and limits to further nickel power diversion, and delayed Middle East +62-21-2554 5000

restarts. These could support aluminium prices and earnings.

Ex China: more supply and less tightness, but no material surplus

We forecast a 1.1mt global aluminium deficit in 2026 before the market returns to

balance in 2027E, supported by >3mt supply growth. In Indonesia, we expect output