Changcai Securities: Bullish on copper and aluminum prices, maintains a "hold" rating on the non-ferrous metals industry.

Shaanxi Securities released a research report stating that among the four major focus metals of copper, aluminum, platinum, and palladium, they are bullish on copper and aluminum prices, cautiously bullish on platinum prices, and slightly bearish on palladium prices. In terms of investment targets, they suggest focusing on copper companies with copper mines and continuous mergers and acquisitions of upstream leading enterprises in the copper sector. Even though the stock prices have risen, the bank believes that the pricing of copper metal has not yet ended. In the aluminum sector, they are focusing on the electrolytic aluminum sector. In the platinum sector, they are focusing on the leading companies in domestic platinum metal recovery. They maintain a "buy" rating for the non-ferrous metal industry. The main points of view of Shaanxi Securities are as follows: Copper This month, copper prices continued to rise, but accompanied by temporary spot discounts. This phenomenon is more likely a short-term adjustment in the background of a rapid rise in copper prices (similar to the situation in the middle of 2024), and it is still too early to judge the turning point of copper prices. The supply side continues to grow, but the cumulative growth rate has fallen compared to the previous year. The demand side continues to decline due to the impact of the reduction in white goods demand caused by the gradual reduction in government subsidies, but the demand for copper from air conditioners and refrigerators remains stable overall. The core contradiction in the short term is focused on concerns about tariffs, big-country games, and capital expenditures in data centers. The white goods industry is more of a recipient of copper prices, rather than a determinant, with limited impact on copper prices. On the inventory side, the behavior of hoarding copper in North America has intensified, and the global tense situation in copper inventories has persisted. The industry's supply and demand contradictions have not been fundamentally resolved, and the overall situation is tilted towards a tight supply and demand, therefore the bullish judgment on copper prices is maintained. Aluminum This month, aluminum prices continued to rise, but with temporary discounts. The price difference between electrolytic aluminum and alumina continued to widen, and the divergence in the trends of the two has not yet reversed. On the supply side, the alumina market is under pressure from supply and demand constraints, apart from the production of fine/chemical alumina, the industry as a whole will continue to be under pressure. On the demand side, there is steady overall growth, but the growth rate is declining. The automotive sector is stable in terms of growth, while the growth rates of new energy vehicles and photovoltaic installations are slowing down, and aluminum alloys are maintaining a relatively high growth trend, supplemented by new energy, AI computing power, and other emerging demands providing long-term support. Inventories are generally at low levels, providing support for aluminum prices. Therefore, aluminum prices are expected to maintain high levels in 2026, and the bullish judgment on electrolytic aluminum prices and high profitability of enterprises is also maintained, while the outlook for alumina prices is bearish, with the industry as a whole remaining under pressure except for a few niche areas. Platinum In December, platinum prices rose rapidly, with futures prices breaking through 700 yuan/gram at one point and maintaining a premium over spot prices. On the demand side, the global automotive market is steadily growing, with strong demand for diesel and hybrid vehicles, forming the core basic demand for platinum. Imports in most months of the year have seen high year-on-year growth, confirming strong demand, but the growth rate of new energy vehicles and photovoltaic installations is slowing down marginally, and the platinum-palladium price differential turning negative is suppressing demand for "platinum replacing palladium", leading to a slowdown in demand growth. On the supply side, mining is highly concentrated in South Africa, with limited room for incremental growth, presenting an overall tight balance of supply and demand. The launch of new products on the Shanghai Futures Exchange has created a speculative atmosphere in the short term. Combined with the current high platinum prices, a cautious bullish view on platinum prices is held. It is expected that in 2026, the marginal improvement in the tight balance between supply and demand will support platinum prices to operate at high levels. In terms of investment, it is recommended to pay attention to companies related to the platinum recycling sector, with a focus on companies that may acquire platinum mines abroad. Palladium In December, palladium prices rose rapidly, with the Shanghai Futures Exchange futures price approaching 600 yuan/gram at one point and maintaining a premium over spot prices. The active short-term trading activity has increased price volatility. On the demand side, weak demand momentum for palladium is due to the decline in the gasoline car market, and core demand is concentrated in the automotive catalyst sector, lacking support from diversified growth points compared to platinum. In terms of inventory, NYMEX palladium inventories have increased significantly since the middle of 2025, reflecting a loosening supply-demand situation. Although there are similarities in supply with platinum, considering factors such as overall supply and demand, inventory, and demand structure, a neutral bearish view on palladium prices is held in the current context of high prices. Updated Views on Key Metals The core dynamics of the listed companies related to the key metals this month are the global mergers and acquisitions of mining giants. Currently, they are in the stagnation cycle of the fifth wave of the Kondratieff cycle, which is the plateau period after the previous cycle of information technology dividends, while the new cycle of technologies (such as artificial intelligence) is still in its infancy. At this stage, some bulk commodity assets are expected to benefit: Leading countries such as the United States face the pressure of a recession, high sovereign debt, long-term trade deficits, and severe industrial hollowing out, which continue to weaken the credibility of the US dollar. The world urgently needs new global anchor assets other than the US dollar and US bonds. Therefore, gold as a global general equivalent is the first to be valued and revalued. As the price of gold rises, bulk commodities that have not been priced by this logic will be revalued, with copper being a typical representative outside gold and copper. Other base metals that fit this logic may also face revaluation; at the same time, the Fed's rate cuts and capital outflows from the United States may further enhance the revaluation of bulk commodities. The United States has been in a long-term state of trade account deficits and capital account surpluses. In recent years, a large amount of capital has been attracted by high interest rates on US bonds. For example, China's trade surplus of about $2 trillion in the past three years has not led to a significant increase in foreign exchange reserves. It is speculated that a large amount of surplus has flowed into the United States to earn fixed income; with the Fed's rate cuts, nearly $2 trillion in surpluses from China alone may flow out, leading to further valuation increases in globally priced commodities such as gold and copper. Monthly Market Review This month, the non-ferrous metal industry saw an increase of 13.68%, with a daily increase of 65.05% in the past six months, both significantly outperforming the Shanghai and Shenzhen 300 Index (with a increase of 2.28% and 16.68% respectively), with both ranking second in the Shenwan industry. Among the sub-industries, copper, other minor metals, and aluminum saw the highest increases. In terms of individual stocks, China National Uranium has topped the list in terms of increases in the past month and the past six months, while the stocks with the largest declines have varied. As of December 31st, the industry's price-earnings ratio is 26.88 times, ranking 12th in the Shenwan industry, with a percentile of 48.4%. The valuation level is significantly higher than the Shanghai and Shenzhen 300 Index (price-earnings ratio of 13.45 times, percentile of 84.0%); there is a clear differentiation in valuations among the third-level sub-industries, with the magnetic materials and other new metal materials sectors leading in terms of price-earnings ratios, while the copper sector is at a low of 22.8 times price-earnings ratio. Risk Warning Risks include unexpected tariffs and Federal Reserve policies in the United States, downstream key industries such as automobiles, photovoltaics, and the power grid experiencing lower-than-expected demand, international and geopolitical risks, and supply-side releases exceeding expectations.