China Securities Co.,Ltd.: Non-ferrous metals are in a strong uptrend, opening a new paradigm for resource pricing.

China Securities Co., Ltd. released a research report stating that last week base metals saw a strong overall increase, with silver and copper reaching historical highs, and gold, tin, and aluminum also setting new high records. Factors such as insufficient capital expenditures, limited resource supply, strong AI demand, expanding fiscal deficits, and a downward interest rate cycle, along with the threat of US tariffs on key minerals, have led to an uneven distribution of physical goods between the US and non-US, causing a partial lack of liquidity in goods and inflow of funds for long positions. A new expression of using limited resources to resist the weakening US dollar credit is causing a new global resource pricing paradigm, with the base metals market currently flourishing. Key points from China Securities Co., Ltd. include: Industrial Metals: The price changes of SHFE copper, aluminum, lead, zinc, and tin last week were 5.9%, 1.0%, 4.0%, 0.5%, and -1.3% respectively. Industrial metal prices are jointly determined by their "financial attributes" and "commodity attributes". From the financial perspective, the US Federal Reserve has begun an interest rate reduction cycle. From the commodity perspective, global copper and aluminum inventories are relatively low, the Chinese economy is expected to recover, and with the promotion of the new energy industry, demand for copper and aluminum is expected to improve. Feast of Base Metals (1) SMM forecasts that copper production will only increase by 26,000 tons by 2025. At the beginning of the year, the market generally expected an increase of 400,000-500,000 tons in copper concentrate production by 2025. However, due to production accidents at large copper mines such as El Teniente, QB2, Kamoa-Kakula, and Grasberg resulting from geological disasters, mining accidents, casualties, tailings pond reconstructions, and declining copper grades, the actual production has been much lower than expected, leading to a limited increase in copper concentrate production this year. (2) The 2026 copper smelting long term TC has been set at 0. Chinese copper smelting representatives reached an agreement with Antofagasta for a long-term copper concentrate processing fee benchmark of $0/ton for 2026, compared to $21.25/ton for 2025. Facing the dilemma of copper concentrate being less than smelting in 2026, avoiding a negative long term TC is considered fortunate. If sulfuric acid prices do not ease, it is unlikely to see reductions in smelting production. (3) Refined copper consumption has had consecutive negative growth. From January to November, domestic refined copper apparent demand = production + net imports - inventory changes = 12.25 + 2.47 - 0.06 = 14.66 million tons, an increase of 660,000 tons year-on-year, with a cumulative growth rate of 4.8%. From September to November, the year-on-year consumption growth rates were -2.4%, -4.6%, -10.6%. The slowdown in consumption growth in various downstream sectors such as power grids, household appliances, and new energy vehicles has dragged down the accumulated growth rate of copper consumption. More importantly, the sharp rise in copper prices has made it difficult for downstream sectors to accept them, and the high prices are starting to have a negative impact. (4) Outlook: Rational equities will eventually move closer to hot commodities. Since the end of November, when a new variable indicating a "structural bull market for copper" appeared at the CESCO conference, copper prices have risen from 86,000 to over 100,000 within a month, with increased shipments to the US and heightened sentiment for precious metals being the main drivers. Compared to the hot copper futures market, stocks appear relatively calm, as there is uncertainty about the duration of the structural bull market brought about by increased shipments and consensus on the positioning of copper prices. Expectations for copper tariffs have not materialized, long-term contracts for 2026 have not been delivered, and the logic of increased shipments will continue. Additionally, equities have not fully priced in the 85,000 copper price, being too conservative, providing a safety margin for positions. It is recommended to hold patiently and wait for opportunities to increase positions when commodity prices pull back.