Deutsche Bank
Markets Research
Australasia
Australia
M&M - Other Metals
Industry
Global Aluminium
Sector
Date
12 September 2017
Recommendation
Change
Market tightening on China cuts
Global aluminium heading for deficit on China cuts. BUY; Alcoa, Rio, Chalco
________________________________________________________________________________________________________________
Deutsche Bank AG/Sydney
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.
Paul Young
Research Analyst
(+61) 2 8258-2587
paul-d.young@db
Sharon Ding
Research Analyst
(+852) 2203 5716
sharon.ding@db
Patrick Jones
Research Analyst
(+44) 20 754-53400
patrick.jones1@db
Jorge Beristain, CFA
Research Analyst
(+1) 203 863-2381
jorge.beristain@db
Liam Fitzpatrick
Research Analyst
(+44) 207 541-3233
liam.fitzpatrick@db
Key Changes
Company Target Price Rating
RIO.AX 73.00 to
75.00(AUD)
-
S32.AX 2.75 to 2.90(AUD) -
AWC.AX 1.95 to 2.15(AUD) -
NHY.OL 50.00 to
60.00(NOK)
-
2600.HK 5.40 to 6.90(HKD) -
Source: Deutsche Bank
Top picks
Rio Tinto (RIO.AX),AUD67.53 Buy
Alcoa (AA.N),USD43.60 Buy
Chalco (2600.HK),HKD6.12 Buy
Source: Deutsche Bank
Companies Featured
Rio Tinto (RIO.AX),AUD67.53 Buy
South32 (S32.AX),AUD3.09 Hold
Alumina (AWC.AX),AUD2.16 Hold
Norsk Hydro (NHY.OL),NOK58.00 Hold
Alcoa (AA.N),USD43.60 Buy
Chalco (2600.HK),HKD6.12 Buy
Century Aluminum (CENX.OQ),USD19.28 Hold
Source: Deutsche Bank
With greater confidence for smelter curtailments in China and ex Chinese
producers remaining disciplined, we now expect the global aluminium market
to shift into material deficits in 2H17 through to 2019. On the back of a tighter
market we upgrade our aluminium price forecasts by 11% in 2H17 to US85c/lb,
and 12% for 2018 to 94c/lb. We expect prices to be well supported until the
end of the Chinese heating season cuts in March 2018. We also raise our
alumina price forecast by 5% in 2H17 to US$330/t and 7% in 2018 to
US$320/t. We upgrade Alcoa to a BUY and maintain BUYs on Chalco and Rio.
Chinese shutdowns leading to global deficits
The shutdown of illegal smelting capacity in China is accelerating. A total of
5.7Mt of illegal capacity across three provinces has been identified by the
government, with c. 1.4Mt in Xinjiang and 1.6-2.1Mt in Shandong already
closed. We understand that full compliance is required by 15 October.
Together with the expected 2+26+3 heating season cuts we now see the
Chine
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