Metals and Mining - China (H): China Aluminum: is the overcapacity fear overstated? A mispricing opportunity?

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Metals and Mining - China (H): China Aluminum: is the overcapacity fear overstated? A mispricing opportunity?

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Metals and Mining - China (H)

China Aluminum: is the overcapacity fear

overstated? A mispricing opportunity?

Industry Overview

Aluminum price high vs. share price large correction 22 June 2026

Hongqiao and Chalco have corrected meaningfully (down >40% from the Jan-26 peak) Equity

driven by concerns of 1) strong USD as macro concern for metals; 2) China YTD China

production at >46mnt run rate (i.e. >45mnt cap), 3) recent market chatter of Indonesia Metals and Mining

and Middle East capacity acceleration; and 4) corporate actions such as placement & Matty Zhao >>

convertible…largely weakened sentiment rather than any deterioration in fundamentals. Research Analyst

Today, we hosted Hongqiao management call at the AI Infrastructure Conference. Merrill+852 3508Lynch4001(Hong Kong)

matty.zhao@bofa.com

HQ: China overcap. concern overdone; Indonesia gradual Miriam Chan, CFA >>

China: Hongqiao emphasized that H1 utilization (103-104%) does not reflect full-year ResearchMerrill LynchAnalyst(Hong Kong)

trends. A sustainable range is 99–101%, while market concern of 105–110% utilization +852 3508 7478 miriam.chan@bofa.com

is highly unlikely. The NDRC’s three-year plan to retrofit 300–400kA electrolytic cells

(with 300kA units a/c for 10–20% of capacity) will temporarily reduce utilization.

Following the lessons of 2017 reforms, the industry is unlikely to risk regulatory

breaches. H1’s higher output—driven by deferred maintenance during strong margins—

should normalize in H2, keeping full-year output broadly in line with the 45mt cap.

Indonesia: Concerns over rapid Indonesian capacity ramp-up appear overstated.