China Securities Co., Ltd.: Geopolitical conflicts reemerge, resource bull market continues

China Securities Co., Ltd. released a research report stating that the United States launched a large-scale military operation against Venezuela on the early morning of January 3rd. This action by the United States has been strongly condemned by the international community, further escalating international tensions and driving the continued allocation of safe-haven funds and central bank purchases of gold, strengthening the bull market trend for precious metals. In terms of base metals, at the beginning of the new year, copper supply has been disrupted due to a strike by mine workers, exacerbating the already tense supply situation. The supply of electrolytic aluminum faces the risk of production reduction, and aluminum prices have broken above key levels. Indonesian nickel miners have proposed cutting nickel ore quotas, and Vale Indonesia has delayed mining operations in support of a bottoming out and rebound in nickel prices. The main points of China Securities Co., Ltd. are as follows: Industrial Metals: Last week, LME copper, aluminum, lead, zinc, and tin prices changed by 2.7%, 2.2%, -0.3%, 1.3%, and -1.7% respectively. Industrial metal prices are determined by both financial and commodity attributes. From a financial perspective, the Fed has initiated a rate-cutting cycle; from a commodity perspective, global copper and aluminum inventories are relatively low, the Chinese economy is expected to recover, and with the push from the new energy industry, copper and aluminum demand growth is expected to improve. Geopolitical conflicts reignite, resource bull market continues (1) Precious Metals: Geopolitical conflicts increase uncertainty. Against the backdrop of overseas regulatory measures to suppress bullion funds, the precious metals market, especially the silver market, experienced a roller coaster ride in the final week of 2025. The United States launched a large-scale military operation against Venezuela on January 3rd, raiding the capital city of Caracas and capturing Venezuelan President Maduro and his wife. The estimated potential gold resources in Venezuela are around 3500 tons, and the country's gold production in 2024 was 31 tons, ranking in the mid-level among gold-producing nations worldwide. The escalation of a new war by the United States has heightened international tensions, leading to continued safe-haven allocations and central bank gold purchases, strengthening the bull market trend for precious metals. (2) Copper: New year supply disruptions boost copper prices once again. On January 2nd, Canadian mining company Capstone announced that its Mantoverde copper-gold mine in Chile would go on strike starting January 2nd. Despite the mine producing only 29,00032,000 tons of cathode copper in 2025, any new supply risks added to the already tight market could impact copper prices. In 2026, there is a total copper market gap of more than 100,000 tons globally, but with no expectation of U.S. copper tariffs, COMEX copper has continued to rise above LME copper, with a price difference still maintaining $100/ton, driving traders to continue moving refined copper to the United States, causing continued tightness in non-U.S. copper supplies. The total gap combined with regional imbalances continues to drive copper prices to new highs. (3) Aluminum: LME aluminum stands strong above $3000. At the beginning of the new year, LME aluminum broke through the $3000 mark, reaching its highest level since 2022, with news that Mozal aluminum plant in Mozambique will be indefinitely shut down starting March 15, 2026, raising concerns about the stability of electrolytic aluminum supply once again. The global new aluminum production in 2026 is expected to be 1.75 million tons, with a growth rate of 2.35%. However, some regions' electrolytic aluminum plants face the risk of shutdown due to insufficient power supply, prompting the market to offer high premiums for aluminum. In addition, the use of aluminum in sectors such as new energy vehicles, power grids, Siasun Robot & Automation maintains high growth, effectively offsetting the negative growth in aluminum use in sectors such as real estate and photovoltaics. With the recovery of PMI in major overseas economies driving aluminum demand, global electrolytic aluminum demand is expected to increase by 1.51.87 million tons in 2026, or by 2%2.5%. The supply and demand are in a tight balance, hinging on the threat to supply from power shortages, keeping electrolytic aluminum prices more inclined to rise than fall, with profits continuing to expand at high levels. Risk Warning 1. Global economic recession, cliff-like contraction in consumption. The World Bank has lowered its global economic growth forecast for 2025 from 2.7% in January to 2.3%, with the growth rates of nearly 70% of economies being revised down. The World Bank states that global economic growth is slowing due to trade barriers and an uncertain global policy environment. Compared to six months ago when the economy appeared to be heading for a "soft landing," the global economy is once again in turmoil. If the course is not corrected quickly, living standards could be greatly affected. Data on global economic trends indicate a downward trend, and a deep recession would have a huge impact on the consumption of non-ferrous metals. 2. Uncontrolled U.S. inflation, Fed tightening more than expected, a strong dollar suppressing equity asset prices. The United States is unable to effectively control inflation and continues to raise interest rates. The Fed has engaged in significant consecutive rate hikes, but services - especially rents and wages - are showing stickiness that constrains the decline in inflation. If the Fed maintains high-intensity rate hikes, this is unfavorable for non-ferrous metals priced in dollars. 3. Slower-than-expected consumption growth in the domestic new energy sector, continued low consumption in the real estate sector. Although policies for real estate sales have been relaxed to varying degrees, the lack of willingness of residents to buy homes and the slow progress in resolving debt risks for real estate companies pose challenges. If sales fail to improve, the later stages of real estate completion may face risks of stagnation, which is unfavorable for consumption of some non-ferrous metals domestically.