Haitong's 2025 strategy for the non-ferrous metal industry: overall supply and demand situation improved, focusing on industrial metals and precious metals.

Haitong released a research report stating that the overall supply and demand pattern of the non-ferrous metal industry will improve by 2025. Among them, the growth rate of industrial metal supply is slowing down, signaling steady growth, and the supply and demand pattern of copper and aluminum is improving; energy metal prices are being pressured at the bottom to clear excess capacity, with lithium and nickel already showing signs of a bottom reversal; significant improvements in the supply side of rare earths will lead to a continuous reversal in rare earth prices, while the monetary attributes of gold and silver are highlighted, and the upward trend is expected to continue, with silver showing more resilience. It is recommended to seize the investment opportunities in the non-ferrous metal industry by 2025. Haitong's main points are as follows: Industrial metals: Supply growth is slowing down, signaling steady growth, and the supply and demand pattern of copper and aluminum is improving. For copper, in terms of supply, the short-term global refined copper year-on-year growth rate is slowing down. If there is insufficient capital expenditure in the medium to long term, it may affect future copper mine production; in terms of demand, domestic demand is expected to gradually warm up after the release of steady growth policy signals, and demand from interest rate-sensitive industries such as real estate and infrastructure is expected to marginally recover under the backdrop of overseas rate cuts. Considering the frequent disturbances in the supply side of the copper industry chain, the tight balance of supply and demand by 2025 may turn into a supply shortage situation. For aluminum, the tight supply of upstream raw materials such as bauxite in 2024 due to frequent production and transportation disturbances may be restored by 2025, with limited new production capacity in the second half of this year combined with low inventory. In the short term, there may still be momentum to maintain high levels or continue to rise. In the long term, with many projects coming into operation in 2025, aluminum may shift to oversupply. The capacity of the primary aluminum supply side is close to the ceiling. It is expected that the global primary aluminum supply and demand will maintain a tight balance in 2024-2025, and the Chinese primary aluminum supply and demand will maintain a small gap or show a slight surplus in 2024-2025. It is recommended to focus on aluminum leading companies with high integration, scale advantages, and low costs. For zinc, on the supply side, processing fees in the fourth quarter are slightly rebounding after a stop in the decline, indicating a shortage of supply at the ore end or a relief, combined with some smelters reducing production, the center of processing fees in 2025 is expected to move upward, thus repairing the profits of smelters. On the demand side, under policy support, infrastructure consumption demand is improving, and real estate consumption is expected to rebound. Energy metals: Price pressure at the bottom drives the clearance of excess capacity, with lithium and nickel showing signs of a bottom reversal. In 2024, lithium and nickel prices are under pressure to decline. Under the industry's widespread pressure of losses, the capital expenditure of energy metals in the next 2-3 years is significantly reduced, with uncertain determinacy of new production capacity. As the loss period continues, the pressure to clear loss-making projects is also increasing, leading to continuous advancement of capacity clearance in the sector. Gold and silver: The monetary attributes are highlighted, the upward trend is expected to continue, and silver may be more resilient. Monetary attributes: There is still a large room for central banks to increase gold reserves. As of Q2 2024, the percentage of countries with central bank gold reserves accounting for less than 5% reached 63%; Financial attributes: The start of a rate cut cycle in the United States may trend down real interest rates; Investment attributes: With central banks such as the Federal Reserve and the European Central Bank starting a rate cut cycle, real interest rates are expected to trend down, driving the investment demand for gold. In the silver industry, domestic steady growth policy signals are released, and the gold-silver ratio may decrease, showing optimism for the high resilience of silver prices. Rare earths: Significant improvements in the supply side, rare earth prices are expected to continue to reverse. On the supply side, in 2024, the growth rate of domestic supply quotas for rare earths slowed down, and regulations on rare earth management were strengthened to control supply. Production from major overseas companies shrunk, leading to a decrease in imports. At the same time, disturbances in Myanmar's situation bring more uncertainty to the supply of rare earths in 2025. On the demand side, demand for electric vehicles and wind power continues to grow at a moderate to high speed, while the demand growth rate for Siasun Robot & Automation is on the rise. With the improvement in the supply and demand pattern, rare earth prices hit bottom and rebounded in the fourth quarter, and are expected to continue to rise in 2025. Risk warning: Economic recovery falls short of expectations, downstream demand is lower than expected, raw material costs rise, adverse changes in monetary policy, international geopolitical risks, etc.