UBS research reports indicate that the global aluminum market may continue to face tight supply, benefiting Chinese companies in the sector. The bank reiterated its "Buy" rating on CHINAHONGQIAO (01378) and raised its target price from HK$28 to HK$38.6.

**Supply Constraints as Key Support, Aluminum Price Forecast Revised Upward** UBS's global metals and mining team predicts global primary aluminum demand growth of 4%/4% in 2026/27, while supply growth is expected at only 1-2%. This imbalance could push the market into a deficit, reducing visible inventories and supporting sustained upward pressure on aluminum prices.

China's aluminum production capacity is strictly capped at 45.2 million tons per year, with current utilization exceeding 98%, nearing policy limits. Domestic capacity expansion in 2026 will be limited, with only Tianshan Aluminum's 200,000-ton expansion and a new 350,000-ton project in Zhalute Banner set to come online. No new capacity is expected in 2027.

Overseas, Indonesia is the primary source of additional supply, but potential production cuts could constrain global primary aluminum supply growth to just 1-2% annually in 2026-27. Meanwhile, UBS forecasts global aluminum demand to maintain 4% annual growth during the same period, widening the supply-demand gap and further depleting inventories, reinforcing price support.

Given the tight supply outlook, UBS raised its 2026/27 China aluminum price forecasts by 5% and 7%, to RMB 22,000/ton and RMB 23,000/ton, respectively. The London Metal Exchange aluminum price forecast was also lifted by ~15%, driven partly by substitution demand amid rising copper prices.

As an industry leader, CHINAHONGQIAO is well-positioned to benefit from constrained supply and favorable pricing. UBS raised its 2026 net profit forecast for the company by 11% and its 2027 forecast by 16%, reflecting higher aluminum price assumptions.