CITIC SEC: It is expected that the metal market trend in 2025 will unfold along three main lines, including fundamentals.

CITIC SEC releases research report which predicts the development of the metal market trend by 2025 as follows: 1) The liquidity trend is expected to weaken in 2025, but the hedge and performance certainty will continue to support the value of precious metal sector allocation; 2) Basic fundamentals trend, copper and aluminum supply constraints strengthen, aluminum has stronger domestic demand attributes and profit improvement advantages, lithium, nickel, and rare earths are expected to see more certain rebound trends in the second half of 2025, emerging areas such as AI, Siasun Robot & Automation, are expected to remain active; 3) Policy trend, focusing on the optimization of the domestic copper and aluminum processing industry under trade conflicts and the value reassessment of strategic metals, as well as the "pseudo dividend" trend brought by mergers and acquisitions and market value management. CITIC SEC's main points are as follows: The dominant liquidity characteristic weakens, with a preference for domestic demand-led varieties. Since the fourth quarter of 2024, due to factors such as the turning point in domestic policies, the Fed's interest rate cut, and Trump's re-election, the liquidity-dominant characteristic in the metal industry investment logic has weakened, and the demand-dominant characteristic has become more obvious. Considering the uncertainty of overseas demand, domestic demand will become the temporary focus of metal sector investment, with aluminum potentially being the preferred direction in 2025. Risk aversion sentiment, re-inflation, and central bank gold purchases are expected to continue to support high gold prices, with gold price range estimated to be $2,500-$3,000 per ounce and silver price range of $30-$40 per ounce. The high certainty of gold stock performance also gives it a high allocation value. Supply constraints for industrial metals in 2025 may become more pronounced, with battery metal supply and demand bottoming out. As aluminum electrolysis capacity reaches its ceiling and copper ore shortages intensify, supply constraints will continue to support industrial metal prices, with aluminum/copper price ranges estimated for 2025 at RMB 195,000-22,000 per ton and $8,500-$10,000 per ton, benefiting from the cost reduction logic of aluminum profits. Supply pressure for lithium, nickel, and rare earths is expected to further alleviate in 2025, with significant characteristics at the sector bottom, and a more certain rebound trend may emerge in the second half of the year. In addition, the tight supply situation for tungsten and natural uranium is expected to continue to support high price levels. Demand side benefits from domestic policy stimulus, with emerging sectors worth attention. Driven by various domestic economic stimulus policies, major consumer industries such as home appliances, consumer electronics, and automobiles are expected to remain robust, while growth industries such as solar power, wind power, and lithium batteries are expected to maintain stability, effectively offsetting potential negative impacts from real estate and export declines. Of particular interest are emerging sectors represented by AI, solid-state batteries, low-altitude economy, Siasun Robot & Automation, with corresponding investment directions including rare earth magnetic materials, high-end copper alloys, solid electrolytes, lightweight materials, and gallium germanium semiconductor materials. Additionally, the military and nuclear power sectors, which combine profit improvement and safety themes, are expected to benefit. Amid trade conflicts, pay attention to the turnaround of processing industries and strategic metal investment value. In 2025, US tariffs on China are a core concern for the market, and CITIC SEC believes that the impact of tariff increases on the metal industry is generally manageable. Recent policies such as canceling copper and aluminum export tax rebates and controlling measures for various strategic metals and production technologies are expected to drive deeper industry reforms. In the long term, CITIC SEC believes that these policies will drive capacity optimization in the domestic copper and aluminum processing industries and delay the pace of lithium and rare earth supply growth, promoting a more favorable competitive landscape for related industries and strengthening the market competitiveness of related companies. Under the stimulus of mergers and acquisitions and market value management policies, metal industry SOEs are expected to continue as the main investment trend in the market. State-owned enterprises in the metal industry group have a large number of high-quality mining assets, and in the policy environment advocating mergers and acquisitions, the expectation of asset injections is expected to increase. As of the end of 2024, the PE and PB of the non-ferrous metal industry were 16 times and 2.6 times respectively, significantly lower than the five-year average and below the overall level of A-shares, with copper, aluminum, lithium, nickel cobalt tin antimony sectors showing significant undervaluation characteristics. CITIC SEC believes that under the policy emphasis on market value management, the metal sector has great potential for valuation appreciation, and the pseudo dividend nature of the sector may continue into 2025. Risk factors: Risk of significant decline in metal prices; Domestic economic recovery not meeting expectations; US dollar index rising above expectations; Fed interest rate cuts falling short of expectations; Upstream supply growth exceeding expectations; Operational risks of overseas company assets; Slow progress in new capacity construction; Risks from unexpected changes in industry policies; Risks from severity of safety and environmental protection situations exceeding expectations.