Key Takeaways:
Aluminum Corporation of China (02600.HK) reported a 56.4% surge in first-quarter net profit to RMB5.527 billion, as rising global aluminum prices offset geopolitical uncertainty.
"The market has underestimated the impact of aluminum supply disruptions resulting from the Iran conflict," Citi said in a report, which maintained its Buy rating and placed the company on a 30-day positive catalyst watch.
The result, which also marked a 207% quarter-over-quarter increase, was in line with the company's earlier profit alert. Citi's HKD15.94 price target is based on a projected 2.81 times price-to-book ratio for 2026. The bank's analysts said Chalco remains their top pick in the sector.
The strong earnings reflect a broader industry trend where producers are benefiting from tight supply and robust demand. U.S.-based Kaiser Aluminum recently raised its full-year EBITDA forecast to a 20% to 30% increase, citing similar market dynamics.
The conflict in the Middle East has significantly impacted global logistics and commodity costs. Teck Resources noted in its recent earnings that higher aluminum prices have reduced the risk of substitution for copper in industrial applications. The disruptions have created knock-on effects across supply chains, with some manufacturers reporting that shipping times to Europe and the U.S. have nearly doubled.
Kaiser Aluminum's (KALU) first-quarter report corroborates the favorable environment, with chief executive officer Keith A. Harvey stating that lead times for products have "more than doubled in the last few months." The company recorded a $36 million gain from metal lag alone, a metric reflecting the price change between purchasing and selling metal, showing the rapid price appreciation.
The guidance from both Chalco and its peers suggests that elevated pricing and demand are expected to persist. Investors will watch for continued margin expansion and how effectively companies can manage sustained logistics costs through the second quarter.
This article is for informational purposes only and does not constitute investment advice.
