Orient: The world's second largest copper mine announces plan to resume production; mid-term copper smelting fees may rise as a result.

Orient releases research report stating that the world's second largest copper mine, Grasberg, has announced plans to restart and resume production, with future production expected to continue to grow. The bank believes that as disturbances in the mid-term mining side are gradually eliminated, the resumption of normal production at copper mines such as Grasberg, Cobre Panam, etc. may significantly contribute to a increase in mining output, easing the tight situation in the copper supply side. It also points out the potential for improvement in copper smelting fees and highlights investment opportunities in mid-term copper smelting companies. Key points from Orient include: - The world's second largest copper mine, Grasberg, announced plans to restart and resume production, with expected future production growth. - Freeport announced this week that it is expected to resume large-scale production at the Grasberg mine area in Q2 2026. According to a phased restart plan, copper production at the Grasberg mine area is expected to remain at 1 billion pounds (454,000 tons) in 2026 and 2025, while production is expected to continue to grow from 2026 to 2027, with average annual production from 2027 to 2029 reaching 1.6 billion pounds (726,000 tons). Previously, on September 8, production at the Grasberg mine area was halted due to a landslide, leading to a downward revision of production guidance by about 200,000 to 270,000 tons for 2025 to 2026. It is estimated that if Grasberg successfully resumes production according to the schedule, it may contribute an increase of about 70,000 tons to copper production in 2026 and 2027, leading to a global increase in copper production by around 3.3% in 2026, effectively easing the tight situation on the mining side. - Several copper mines are expected to resume production in the mid-term, easing the tight situation on the mining side. - In addition to the Grasberg mine, the reopening of the Cobre Panam copper mine owned by First Quantum is also being considered. Cobre Panam's annual production capacity can reach 300,000 to 350,000 tons of copper metal, accounting for approximately 1.5% of global copper supply. Production was halted at the end of 2023 due to a ruling by the Panamanian government that the operating contract signed with First Quantum was unconstitutional. The Panamanian government is now prepared to negotiate with First Quantum to resume copper mining, with negotiations scheduled to begin at the end of 2025 or the beginning of 2026. The bank believes that, as disturbances on the mining side are gradually eliminated, the resumption of normal production at copper mines such as Grasberg, Cobre Panam, etc. may significantly contribute to an increase in mining output, easing the tight situation on the copper supply side. - The growth rate of copper smelting production in 2026-2027 may be lower than that of copper mining supply side, and there may be potential improvement in copper smelting fees. - With expectations of disturbances on the mining side being gradually eliminated and large copper mines expected to resume production, the growth rate of copper mining supply side production in 2026-2027 may significantly increase compared to 2025. It is estimated that the year-on-year growth rate of copper production in 2026-2027 could reach 3.3% to 5.3%. Currently, several overseas smelters are reducing capacity due to a shortage of copper concentrates and high costs, combined with expectations of the implementation of the "anti inwardness" policy measures in the domestic midstream copper smelting sector, the growth rate of copper smelting production in the mid-term may be lower than that of the copper mining supply side. The bank believes that there may be marginal improvement in copper smelting fees, and recommends keeping an eye on investment opportunities in mid-term copper smelting companies. Investment recommendations and targets Copper smelting side: It is recommended to pay attention to Tongling Nonferrous Metals Group (000630.SZ, Buy), one of the largest copper smelting companies in the country with the expectation of an increase in copper concentrate self-sufficiency from the Mirador copper mine resources. Other targets: Jiangxi Copper (600362.SH, Unrated). Copper mining sector: It is recommended to focus on Zijin Mining Group (601899.SH, Buy), which has large reserves of resources and potential for continuous expansion of copper mines in the mid-term. Other targets: CMOC Group Limited (603993.SH, Unrated), Jchx Mining Management (603979.SH, Unrated). Risk factors Risk of copper mine restart progress falling short of expectations, risk of midstream copper smelting expansion progress exceeding expectations, risk of macroeconomic fluctuations leading to lower-than-expected downstream copper demand, risk of production capacity statistics omission affecting calculation results.