Orient: The trend of supply shortages is the fundamental driving force for the rise in copper prices. We continue to be optimistic about the mid-term investment value of the copper sector.

Orient released a research report stating that the Mantoverde copper and gold mine in Chile is facing the risk of a strike due to a labor negotiation deadlock, which may affect the increase in copper supply in 2026. Against the backdrop of high copper prices, the intensification of the labor-management interests game in global copper mines may become a hidden risk point in the supply chain. Supply shortages and demand growth together support the upward trend in copper prices, and the medium-term investment value of the copper sector continues to be optimistic. Orient's key points are as follows: The Mantoverde copper and gold mine in Chile is facing the risk of a strike and production stoppage, which may increase the uncertainty of supply increment in 2026. On December 25, the union of the Mantoverde copper and gold mine owned by Collahuasi indicated that if demands such as wage increases and improved working conditions are not met in the new labor contract, an indefinite strike may be initiated. Both the company and the union have conducted three rounds of formal negotiations since November 2025, but have not reached a consensus. In the current situation of tight copper supply, the occurrence of a strike may increase the uncertainty of supply increment in 2026, continuously driving the copper price upwards. Against the backdrop of high copper prices, the game of labor-management interests distribution may become a hidden risk point on the supply side. Although the Mantoverde copper and gold mine in Chile, which is facing the threat of a strike, is expected to produce 29,000 to 32,000 tons in 2025, contributing a relatively small proportion to the supply side, the bank believes that in the context of continuously rising copper prices, the game of interests distribution between companies and employees may increase the probability of such copper mine strike events caused by wage disputes. For example, the world's largest copper mine, Escondida in Chile, went on strike in February 2017 and August 2024 due to reasons such as unfair wage treatment and high safety production risks under the circumstances of rising copper prices. The strike in 2017 led to a reduction of 210,000 tons of output from the mine, accounting for more than 1% of the total copper production in 2017, directly driving the copper price to the highest level since May 2015. The strike in 2024 also caused panic and short-term upward pressure on copper prices when global copper concentrate supply was tight. The bank believes that with copper prices at historical highs, the game of interests distribution between mining companies and labor may intensify, becoming a vulnerable hidden risk point in the mining supply chain, or aggravating disturbances in the mining end, thereby continuing to drive up copper prices. The trend of supply shortage is the fundamental driving force for the rise in copper prices, and the medium-term investment value of the copper sector continues to be optimistic Since the Grasberg mining accident in September, the market has gradually reached a consensus on the supply reduction caused by mining accidents, but the probability of strikes due to high copper prices, which may exacerbate the fragility of the mining supply chain, has not yet been fully recognized. Looking back at the reasons for the rise in copper prices, the bank believes that the fundamental factor of supply shortage is still the main driving force, and the uncertainty of supply increment may continue under disturbances such as earthquakes and strikes. With downstream copper demand expected to continue growing due to the upgrade of power grids in Europe and the United States and the global trend towards clean energy transformation, the bank continues to be optimistic about the medium-term investment value of the copper sector, and is bullish on the continuous upward trend of copper equity after the market fully recognizes it. Investment recommendations and investment targets Mining side: Recommend paying attention to Zijin Mining Group, which has large reserves of resources and the expectation of continuous production expansion in the medium term. Other targets include CMOC Group Limited and Jchx Mining Management. Smelting side: Recommend paying attention to Tongling Nonferrous Metals Group, one of the largest copper smelting companies in the country, with the expectation of an increase in copper concentrate self-sufficiency ratio due to the volume increase of Mirador copper mine resources. Other targets include Jiangxi Copper. Risk warning: Macroeconomic fluctuations leading to lower-than-expected downstream copper demand risks, and excess supply risks due to unexpected increases in production on the mining side.