MS-China Materials Asia Pacific Aluminium：Better-than-expected Demand and Supply-20251119

We believe the aluminum outlook has improved with muchbetter than our expected demand from ESS and supplychallenges from power issues. We now see more upside toChalco's and Hongqiao's earnings.

Aluminum demand in China seeing material growth from ESS and otherconsumer electronics: Energy storage (ESS) is consuming more aluminum as itsgrowth rate picks up materially. ESS was used in only 25% of total batteries in Chinain June, but that has since increased to more than 40%, and we expect high growthto continue. Reflecting casting, foil and components, we estimate that every100GWH of ESS will consume aluminum of 160kt; 2024 global ESS was at350GWH, and we see 600GWH in 2025 and expect 2026 to grow 50% or more. For2025, we estimate ~960kt (+71.4% YoY) of aluminum is being consumed by ESS,and we see another 1.44mt of aluminum demand in 2026. This, together with EV,appliances, power cables, etc., should lead to more than 2% demand growth.