EB Securities: Supply growth remains restricted, bullish on copper, aluminum, and steel investment opportunities.

EB SECURITIES released a research report stating that it maintains a "buy" rating for the steel/non-ferrous metal industry. The industry's prosperity ranking is as follows: copper/aluminum > gold > steel. 1) Steel: Currently, listed steel companies are highly focused on investor returns. With major steel enterprises expected to complete ultra-low emission transformations after 2026, capital expenditure for these enterprises is expected to gradually decrease. The dividend payout ratio for steel companies is expected to increase further, showing long-term value in the sector. 2) Copper/aluminum: Global copper supply is tight, and there will be a shortage of refined copper from 2025 to 2026, potentially leading to higher copper prices. The central price of electrolytic aluminum is expected to continue to rise in 2026. With aluminum profits expanding and dividend attributes supporting, investment opportunities in the aluminum sector are promising. 3) Gold: The cycle of interest rate cuts in the United States is driving investment demand up, combined with the continued trend of global central banks increasing their gold holdings, leading to a continuous upward trend in gold prices. EB SECURITIES' main points are as follows: Review and Outlook Supply of steel, copper, and aluminum continues to be limited, with demand determining price levels. The bank stated in its 2025 annual strategy that the growth in supply of steel, copper, and aluminum is limited, with demand being the key variable. Looking ahead to 2026, the supply of steel, copper, and aluminum will still be limited, and market flexibility will depend on the strength of economic recovery. Gold will benefit from the interest rate cuts in the U.S. and central bank holdings. Industry ranking: copper/aluminum > gold > steel. Supply The growth in supply of steel, copper, and aluminum is still limited. 1) Steel: In the medium to long term, energy consumption and carbon emissions will still be primary factors restricting supply. In the context of "anti-internal circulation," crude steel production will continue to face pressure, and it is necessary to pay attention to whether policies similar to the 2017 supply-side reform will be introduced in the future. 2) Copper: Companies like Freeport-McMoRan and Teck Resources have lowered their production guidance for 2026, intensifying disruptions in the mining sector. It is expected that global refined copper production will decrease by 0.1% in 2026. 3) Aluminum: Under the restriction of capacity ceilings, China's electrolytic aluminum production is expected to grow by 1.6% in 2026. Demand The strength of demand recovery contributes to the elasticity of steel, copper, and aluminum prices. 1) Steel: The real estate market is still expecting a stabilization, with land transactions and construction areas at low levels compared to the same period last year. The World Steel Association predicts that China's steel demand will decrease by 1% in 2026. 2) Copper: New energy demand remains the main driver of future growth, with global copper demand expected to increase by 1.5% in 2026. 3) Aluminum: The growth of manufacturing industries (new energy vehicles, power, consumption, among others) offsets the decline in the real estate sector, with China's aluminum demand expected to increase by 1.8% in 2026. Gold ETF investment demand and central bank holdings continue to support the upward trend of gold prices. The U.S. entering an interest rate cutting cycle, combined with increasing global uncertainty, has prompted a return in gold ETF investment demand. Against the backdrop of de-dollarization, the trend of global central banks increasing their gold holdings continues. Recommendations 1) Steel: Current steel sector companies are highly focused on investor returns, with overall dividend levels considerable. Recommended companies include Baoshan Iron & Steel, Zhejiang JIULI Hi-tech Metals, with a focus on Inner Mongolia ERDOS Resources, CITIC Pacific Special Steel Group, Hunan Valin Steel. 2) Copper sector recommendations include Zijin Mining, CMOC Group Limited, with a focus on Tongling Nonferrous Metals Group, Western Mining, Jchx Mining Management; Aluminum sector recommendations include CHINAHONGQIAO, with a focus on Yunnan Aluminium, Henan Shenhuo Coal & Power, Henan Zhongfu Industrial. 3) Gold: Recommended Zijin Mining, with a focus on Chifeng Jilong Gold Mining, Zijin Gold International. Risk analysis: Economic recovery strength lower than expected; risks of steel, copper, and aluminum supply exceeding expectations; risks of rapid increase in copper and aluminum prices suppressing downstream demand.