HSBC Research has reported a significant surge in China’s alumina spot price, which once rose 5% to reach RMB 4,100 per ton, marking a record high. This spike follows Rio Tinto’s declaration of force majeure on Australia’s alumina exports due to natural gas shortages and concerns about new supply disruptions. The force majeure is expected to impact approximately 1.2 million tons of capacity, representing about 1% of the global supply.
HSBC believes that future aluminum price increases will be driven primarily by market sentiment. However, the tight supply situation presents an upside risk to alumina spot prices. According to the bank, Hongqiao (01378.HK) is poised to benefit the most from higher alumina prices.
The bank maintains an optimistic outlook on China’s aluminum industry, citing strong margin expansion from rising aluminum prices and weak costs. HSBC expects margins to remain high over the long term amid tight supply and sees potential for further re-rating of the Alcoa brand. The bank is more bullish on Hongqiao than Chalco (02600.HK) due to Hongqiao’s lower valuation and attractive dividend yield. Both companies maintain “buy” ratings, with target prices of $13.9 for Hongqiao and $6.2 for Chalco. 
