Alumina prices fell sharply Alumina is the main raw material for the production of electrolytic aluminum, which consumes about 2 tons of alumina per ton of electrolytic aluminum production. The cost of alumina accounts for about 55% of the total cost and the cost of electricity accounts for about 30% of the total cost. Since August of this year, the price of alumina dropped for two consecutive times. The price of alumina dropped from 5,650 yuan/ton in early August to 3,800 yuan/ton, and the aluminum oxide factory price of China Aluminum decreased by 32.74% in the short term. On September 26, China Aluminum once again announced that the spot price of alumina has dropped from 3,800 yuan/ton to 2,950 yuan/ton, a decrease of 22.4%. In less than two months, China Aluminum has lowered the spot price of alumina three times in a row, dropping from a high of 5,650 yuan/ton this year to 2,950 yuan/ton, and the actual decline in alumina prices has reached 47.78%, almost falling. half. The decline in alumina prices was mainly affected by the following factors: First, the impact of overcapacity on production capacity. The decline in foreign alumina prices was an external cause of the decline in alumina prices, and the release of domestic non-China Aluminum-based alumina companies resulted in production capacity. The fall in prices is an inherent requirement for Chinalco to continuously lower prices in just two months. Second, the high profits of alumina producers have attracted numerous institutional investments. The substantial adjustment of alumina prices has significantly reduced the cost of electrolytic aluminum listing, and it is undoubtedly good news for electrolytic aluminum listed companies. In 2005, China’s electrolytic aluminum consumption increased by 18% to approximately 7.12 million tons. In 2006, China's alumina production is expected to reach 13 million tons, although aluminum production has also increased, but the growth rate is significantly less than the expansion of alumina production capacity. Demand for electrolytic aluminum is expected to grow Judging from the development trend of the industry, China experienced an upsurge in the construction of electrolytic aluminum in 2003 and 2004, and its production capacity increased significantly. In 2005, the actual output was 7.85 million tons. Currently, the electrolytic aluminum production capacity that has been completed has reached 10 million tons. Electrolytic aluminum as a large energy consumer, the environment is also more serious pollution, so the macro-control electrolytic aluminum industry as one of the regulatory industry, in recent years, due to the high raw material alumina prices, electrolytic aluminum industry profits fell sharply, The electrolytic aluminum company's production capacity has also been idle, and the new batch of electrolytic aluminum projects have also been controlled. In 2005, with the high prices of alumina and electricity, electrolytic aluminum companies suffered serious losses. Small electrolytic aluminum companies began to gradually reduce production and shut down. At the same time, from the perspective of industry concentration, electrolytic aluminum plants with a total output of 100,000 tons or more accounted for the total output in 2005. At 66%, the industry concentration further increased. Taken together, the production capacity of alumina has increased substantially due to the large number of newly added companies and the production capacity has greatly increased. We expect that although there will be some adjustment pressures for aluminum prices in the future, the strong demand will allow aluminum prices to remain high. Electrolytic aluminum is widely used in the construction, transportation and power industries. The electrolytic aluminum industry is expected to enter the business cycle. According to the forecast of Alcoa, the world’s largest aluminum producer, it is expected that the growth rate of aluminum demand in China will be 12.5% ​​from 2005 to 2009, and the growth trend of electrolytic aluminum industry is expected to continue. Focus on listed company reviews Nanshan Industrial (600219) earned 0.14 yuan per share for the middle of 2006, and the current net asset per share was 4.39 yuan. On August 24, Nanshan Industry announced that the Board of Directors reviewed and approved the "Proposal on the Company's Non-Public Issuance of Shares to Specific Targets Scheme" plan to privately issue shares to specific targets, with the total number of issued shares not exceeding 70 million shares. Among them, 71% were issued to Nanshan Group, the controlling shareholder, no less than the number of shares issued this time. After the private placement, the non-aluminum business of the company will be stripped and injected into the group's core aluminum assets. After the private placement is completed, Nanshan Industrial will become a pure aluminum company and will also have a complete domestic aluminum industry chain covering upstream alumina and downstream deep processing. If the non-public offering of shares is successful, it is expected that the company's performance will increase significantly in 2007. From the secondary market, it is expected that the stock will have the potential to break through the highs of the year and continue to strengthen in the medium and long term. Guanlv (000831) achieved revenue of RMB 1.023 billion in its main business in the first half of 2006, a year-on-year decrease of 21.73%; net profit of RMB 0.22 billion, a year-on-year increase of 14.55%; and EPS of RMB 0.06, a year-on-year increase of 20%. The current net asset per share is 2.97 yuan. The board meeting recently held by the company passed a proposal on the non-public issuance of shares by the company. The number of shares to be issued will not exceed 50 million shares, and the raised funds will be used to invest in the company's 10kt/a high-purity aluminum project. After being completed and put into production, it can produce 12,247 tons of 70KA series high-purity aluminum ingots each year, which will enhance the company's competitiveness and profitability. In March this year, Xihuashengsheng Aluminum Co., Ltd., a joint venture between the company and China Aluminum, has been put into production and production capacity will gradually expand. The company's benefits are also expected to grow with the expansion of production capacity and the widening of the electrolytic aluminum-alumina price gap. In the secondary market, the stock has adjusted extremely well with the market since May and the risk has been fully released. Non-public issuance of stocks, industry warming, and capacity expansion are expected to be an opportunity for the stock to strengthen. Lanzhou Aluminum (600296) is a large aluminum smelting and processing company in China. In the middle of this year, earnings per share were 0.22 yuan, net assets per share was 5.534, and mid-term sales revenue was up 20.4% year-on-year. The former largest shareholder of Chalco is in the process of peer competition and related transactions with Lanzhou Aluminum. Some researchers believe that if Chalco's A shares are listed, Lanzhou Aluminum Co., Ltd. is likely to be “privatizedâ€. At present, the company has not yet reformed its stocks. Its stock rights, privatization expectations, and the warming of the industry have increased the investment opportunities of the stock. It is also expected to become an important driving force for the rise in the stock price of the stock. Currently, its P/E ratio and P/B ratio are at a relatively low level in the industry, and the investment risk is relatively small. In the secondary market, the stock has recently bottomed out and there are new funds involved. The market outlook is worthy of attention.