China Securities Co., Ltd.: Progress in US-Iran negotiations will help boost copper prices and the valuation of targets will be repaired.

China Securities Co., Ltd. released a research report stating that disruptions in copper supply and solid buying support at low levels have helped copper prices withstand the pressure from rising US bond yields. In a scenario where commodities are being driven upwards by industry demand and downwards by financial properties, the support level at 10,000 RMB per ton for copper is solid. The continuation of Middle East conflicts has pushed up oil prices and inflation expectations, leading to downward pressure on commodity prices and stock market risk. On May 23, US President Trump claimed that the US and Iran have "essentially agreed" on a deal, with final details to be announced soon and the Strait of Hormuz to be reopened. If this is true, the financial properties of industrial metals will be unleashed, leading to a recovery in commodity prices and equity valuations. Key points from China Securities Co., Ltd. include: Industrial Metals: This week, LME copper, aluminum, lead, zinc, and tin prices changed by 0.7%, 2.4%, 1.5%, 0.2%, and 4.0%, respectively. Industrial metal prices are determined by both financial and commodity properties. The Federal Reserve has started an interest rate cut cycle, while global copper and aluminum stocks are relatively low, with expectations of Chinese economic recovery and growth in copper and aluminum demand driven by the new energy industry. Supply and demand dynamics support copper prices holding above 10,000 RMB per ton, progress in US-Iran negotiations will help open up upward momentum for copper prices. Global major mines saw a year-on-year production decrease of 60,000 tons in Q1 2026. The quarterly output of major global copper mines continued to decline year-on-year, with a significant decrease seen in the Freeport mine due to production stoppage from mudslides, lower-than-expected resumption, and an increase in wet ore underground after months of shutdown, necessitating ore transport system modifications. Q1 financial reports have shown downgrades in production guidance for KK, Grasberg, and Mirador mines in 2026, with First Quantum in Panama only giving a 30,000 ton tailings treatment quantity and delayed resumption. Copper concentrate TC dropped to -106 USD per ton, eroding profits from fast-increasing byproduct sulfuric acid prices. Sulfuric acid prices rose to 1525 RMB per ton, as smelters lowered TCs to -106 USD, eroding profits from sulfuric acid amid falling TCs. Despite no signs of smelter losses, a concentration of smelter reductions have not yet occurred. Smelter maintenance is concentrated in May, with domestic electrolytic copper production expected to be 1.1675 million tons in May, up 7.6% year-on-year in production from January to May. Refined copper consumption in the first four months grew by 1.6%. From January to April, domestic refined copper apparent demand = production + net import inventory change = 471 + 64 - 7 = 528,000 tons, an increase of 80,000 tons year-on-year at a cumulative growth rate of 1.6%. With prices returning to 10,000 RMB per ton, downstream purchasing intentions decreased, with May apparent demand growth slowing compared to March and April; given that almost half of the copper is used in the power grid, high weight and high growth levels drive copper consumption as a leading performer among non-ferrous metals. Supply and demand dynamics support copper prices holding above 10,000 RMB per ton, progress in US-Iran negotiations will help open up upward momentum for copper prices. Disruptions in copper supply and strong buying momentum at low levels have allowed copper prices to withstand the pressure from rising US bond yields. In a scenario where commodities rise due to industry demand and fall due to financial properties, the support level at 10,000 RMB per ton for copper is solid. US President Trump claimed on May 23 that the US and Iran have "essentially agreed" on a deal, with final details to be announced soon and the opening of the Strait of Hormuz. The opening of the Strait of Hormuz will relieve the market's bias towards high oil prices, pushing copper prices higher and aiding in the recovery of long-term copper equity valuations. Risk Analysis: 1. Global economic recession leads to a sharp decline in consumption. 2. Uncontrolled inflation in the US, unexpected tightening of Federal Reserve monetary policy, and a strong US dollar suppress equity asset prices. 3. Slower growth in consumption in the domestic new energy sector and sustained weakness in the real estate sector.