UBS has released a research report highlighting that CHINAHONGQIAO (01378), as an industry leader, is poised to benefit from constrained supply and favorable pricing conditions. Based on higher aluminum price forecasts, UBS has raised its 2026 net profit estimate for the company by 11% and its 2027 net profit estimate by 16%. The bank reiterated its "Buy" rating on CHINAHONGQIAO (01378) and increased the target price from HK$28 to HK$38.6.

Supply constraints remain a key driver, with the supply-demand gap continuing to widen. UBS's global metals and mining team estimates that global primary aluminum demand will grow at an annual rate of 4% from 2026 to 2027, while supply growth will lag at just 1%-2%, potentially leading to a market deficit. This could drive down visible inventories and provide strong support for aluminum prices.

In China, aluminum production capacity is strictly regulated by policy, with an upper limit set at 45.2 million tons per year. Current capacity utilization exceeds 98%, nearing the policy threshold. In terms of new capacity, only Tianshan Aluminum's 200,000-ton expansion project and a 350,000-ton new project in Jarud Banner are expected to commence production in 2026, with no additional capacity planned for 2027.

Globally, the main supply increase is concentrated in Indonesia, but potential production cuts at some projects may limit growth. As a result, global primary aluminum supply is projected to grow at just 1%-2% annually in 2026-2027. Meanwhile, global aluminum demand is expected to maintain a 4% annual growth rate, further widening the supply-demand gap.

UBS has also raised its aluminum price forecasts, citing tight supply-demand dynamics and substitution demand driven by rising copper prices. The bank increased its 2026 China aluminum price forecast by 5% to RMB 22,000 per ton and its 2027 forecast by 7% to RMB 23,000 per ton. The London Metal Exchange aluminum price forecast was also revised upward by approximately 15%, supported by growing substitution demand as copper prices climb.