Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Fitch Ratings has given China Hongqiao Group a BB- rating, indicating a stable outlook because of its competitive cost base and low input costs.


As one of the largest aluminum smelters in the world, China Hongqiao’s costs rely on considerable economies of scale. However, its captive power-generation assets might be surcharged, which would hurt its production costs, Fitch noted.


The company weathered the pandemic well, including repressed manufacturing activity and plummeting commodity prices, because of its lower costs. As soon as the Chinese economy reopened in April, the company’s aluminum profits began rising, and Fitch believes the material’s prices in the country will remain stable for the rest of the year.


The company has 6.5mn mt of total aluminum capacity, with prices this year at $1,560/mt, which could rise to $1,600/mt next year, $1,800/mt in 2022, and $1,900/mt in 2023 and beyond.


The company will move 1mn mt of aluminum output to Yunnan province in the southwestern part of the country from Shandong, where captive power-generation costs could add substantial cost to its production, and production will ramp up considerably in H2 2020. In addition to cheaper renewable energy and lower output costs, the provincial government has offered funding support. If the move goes well, the company intends to move an additional 1mn mt in 2022-23.

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