Huayuan Securities 2025 Nonferrous Metals Strategy: "Aluminum" Creates Glory, Gold Long Bull

According to the Zhitong Finance APP, Huayuan Securities released a research report stating that looking ahead to 2025 for non-ferrous metals, the upward logic of gold prices remains unchanged, with the dual main lines of "interest rate cut trading" + "Trump 2.0" expected to continue to catalyze. On the other hand, under the backdrop of protectionism and great power competition, the central bank's increase in reserves provides strong bottom support for gold prices. In the short term, the expectation of interest rate cuts by the Federal Reserve in 2025 and the inflation expectation trading driven by tariff policies after Trump's return to power may dominate gold price trends. In the long term, under the backdrop of dual easing of U.S. monetary and fiscal policies, dollar credit contraction, and de-dollarization, gold is expected to still have room for long-term growth.

Alumina may shift from shortage to surplus, with new production capacity of 13.2 million tons in 2025 (expected effective output of about 5.45 million tons), which can meet the demand for electrolytic aluminum of about 2.87 million tons. In the long term, alumina may trend downward, with the turning point expected between February and April 2025. As the shortage at the mining end gradually transmits to the metal end, the demand side, driven by the rapid growth of new momentum demands such as wind power, photovoltaics, and new energy vehicles, will maintain continuous growth in copper demand. The supply-demand turning point in the copper industry may be approaching, with supply-demand balances expected to be 180, -660, and -1,030 thousand tons from 2024 to 2026, respectively, and copper prices are expected to reach new highs.

The main views of Huayuan Securities are as follows:

Gold: Multiple factors do not change the long-term optimistic logic, gold enters the left-side layout range

The pullback in gold prices in November 2024 is mainly due to the U.S. election events landing, expectations, and short-term economic data catalysis. The current gold price may have partially or completely reflected the corresponding marginal changes, and a bottom range has emerged. The upward logic of gold prices remains unchanged, with the dual main lines of "interest rate cut trading" + "Trump 2.0" expected to continue to catalyze. On the other hand, under the backdrop of protectionism and great power competition, the central bank's increase in reserves provides strong bottom support for gold prices. In the short term, the expectation of interest rate cuts by the Federal Reserve in 2025 and the inflation expectation trading driven by tariff policies after Trump's return to power may dominate gold price trends. In the long term, under the backdrop of dual easing of U.S. monetary and fiscal policies, dollar credit contraction, and de-dollarization, gold is expected to still have room for long-term growth.

Recommended to pay attention to: leading stocks - Shandong Gold (600547.SH); valuation repair elastic stocks - Chifeng Gold (600988.SH), Zhongjin Gold (600489.SH), Shanjin International (000975.SZ); stocks with asset injection expectations - China Electric Motor (603988.SH).

Aluminum: Long-term downward trend of alumina, preparing for insufficient electrolytic aluminum capacity

From the monthly supply-demand balance perspective, the shortage of alumina has eased since November 2024, and with the release of 7.2 million tons of alumina capacity in the first half of 2025, alumina may shift from shortage to surplus, with new production capacity of 13.2 million tons in 2025 (expected effective output of about 5.45 million tons), which can meet the demand for electrolytic aluminum of about 2.87 million tons. In the long term, alumina may trend downward, with the turning point expected between February and April 2025. The expected production of electrolytic aluminum in 2024 is 43 million tons, with future production growth limited to less than 2 million tons, while the consumption demand for electrolytic aluminum exceeds 44.8 million tons. The expected supply-demand balances from 2024 to 2026 are 171, 53, and -39 thousand tons, respectively, with electrolytic aluminum gradually shifting from surplus to shortage, and electrolytic aluminum is about to be in short supply Recommended to pay attention to: Yun Aluminum Co., Ltd. (000807.SZ), Shenhuo Co., Ltd. (000933.SZ), Electric Power Investment Energy (002128.SZ), Tianshan Aluminum Industry (002532.SZ), China Aluminum (601600.SH), Zhongfu Industrial (600595.SH), Jiaozuo Wanfang (000612.SZ).

Copper: With a consensus on ore shortages, copper prices are expected to reach new highs

The long-term contract for TC/RC in 2025 is set at $21.25/2.125 cents, with smelting processing fees hitting a historical low. The average smelting cost in the industry is around $35-40 (considering sulfuric acid revenue, excluding precious metal by-products). At this price, smelters are experiencing losses, and some high-cost private smelters may reduce production in 2025, leading to a gradual transmission of ore shortages to the metal side. As the ore shortage gradually transmits to the metal side, demand is expected to maintain continuous growth due to the rapid increase in new energy demands such as wind power, photovoltaics, and new energy vehicles. A turning point in supply and demand in the copper industry may be approaching, with expected supply-demand balances of 180,000 tons, -660,000 tons, and -1,030,000 tons for 2024-2026, respectively, and copper prices are likely to reach new highs.

Recommended to pay attention to: Zijin Mining (601899.SH), Luoyang Molybdenum Co., Ltd. (603993.SH), Jincheng Mining (603979.SH), Tongling Nonferrous Metals Group (000630.SZ), and the undervalued Hebei Steel Resources (000923.SZ).

Lead and Zinc: Supply contraction, price center shifts upward

1) Zinc: Significant contraction in ore supply. In the first ten months of 2024, global zinc concentrate production hit a near five-year low, with overall refined zinc supply remaining tight, leading to a continuous rise in zinc concentrate prices. At the same time, due to ore shortages, zinc smelting processing fees have significantly declined, and with the dual catalysts of rising zinc prices and falling smelting processing fees, mining companies' profits continue to expand.

2) Lead: Lead ore price center shifts upward. Lead ingot supply is divided into recycled lead and primary lead. The production of recycled lead remains stable, while primary lead is mostly associated with zinc, and due to the contraction in zinc ore supply, primary lead production declined in September 2024, with monthly production remaining low in the first half of the year. As a result, the supply-demand balance for refined lead has begun to shift to a shortage, leading to a continuous rise in lead concentrate prices. The contraction in zinc ore supply has also led to a decline in zinc ingot smelting processing fees.

Lithium: Excess has narrowed, and the lithium price center may be at 80,000 in 2025

During the continuous decline in lithium prices, high-cost lithium mines have been reducing or halting production, and the clearing of the lithium industry is ongoing, with marginal growth in lithium supply weakening. It is expected that lithium salt supply corresponding to lithium mines will reach 1.51 million tons LCE in 2025, a year-on-year increase of 15%. Under the old-for-new policy, electric vehicle demand may exceed expectations, with projected lithium carbonate demand of 1.43 million tons in 2025, a year-on-year increase of 19%. Considering inventory and recycling output, we expect a surplus of 126,000 tons of lithium carbonate in 2025, with a surplus ratio of 9%, indicating a narrowing of the excess. Based on the complete cost curve and supply-demand balance sheet, we expect the price center for lithium carbonate in 2025 to be 80,000 yuan/ton, with limited rebound height and downward space.

Recommended to pay attention to: 1) Undervalued targets with a second growth curve: Yahua Group (002497.SZ) (civil explosives), Zhongkuang Resources (002738.SZ) (copper + minor metals); 2) Still have the potential for lithium self-sufficiency improvement and cost reduction targets: Yahua Group, Ganfeng Lithium (002460.SZ), Yongxing Materials (002756.SZ), Zhongkuang Resources.

Metal New Materials: AI + Technology + Changes in Automotive Terminal Prosperity, Empowering Metal New Materials to Cross Cycles and Enjoy Growth Rare Earth Permanent Magnet: The demand for electric vehicles and robots resonates, with industry profitability margins improving across cycles. On the demand side, rare earth permanent magnets are important materials for high-performance motors, with the demand for new energy vehicles continuously increasing as a major driving force. Wind power demand is expected to bottom out and recover, while potential demand for industrial and humanoid robots is likely to enter a growth phase. On the supply side, the growth rate of quotas is slowing, and supply is gradually improving. The prices of rare earth oxides and magnetic materials are expected to bottom out and rebound by mid-2024, with the industry likely to cross cycles and welcome a profitability turning point.

Soft Magnetic Materials: AI Industry Empowerment Growth Phase Two, Automotive Platforms Carrying Emerging Industry Trends. High-performance soft magnetic materials are core materials for inductors and transformers, with high-frequency low-loss advantages matching the trend of high power density in electronics and power. Soft magnetic materials represented by alloy soft magnetic powder cores (chip inductors), carbonyl iron soft magnets (magnetorheological intelligent suspension), and amorphous alloys (amorphous automotive motors) are achieving breakthroughs from 0 to 1 in new terminals.

Powder Materials: Fine Powder Application Scenarios Continuously Opening Up, Consumer Electronics + AI + Photovoltaics Blooming in Multiple Points. Making powder "fine" achieves higher gross margins and terminal quality, matching the demand for electronic components, structural parts, and metal replacements. MIM technology is widely used in consumer electronics, with foldable screen hinges driving its prosperity cycle. Copper-based powders are widely applied, with AI heat dissipation devices driving new applications for thermally conductive copper powder. The urgent demand for cost reduction in photovoltaic silver paste opens up the imagination space for silver-coated copper powder and nano copper powder.

Alloy Materials: Aluminum Thermal Materials Continue to Prosper, Lightweight Magnesium Alloys Have Broad Space, High-end Copper Alloys Are Increasing Production. The usage of aluminum thermal materials in new energy vehicles has doubled, with the industry actively expanding production to continuously verify its high prosperity. The lightweight + shockproof + heat dissipation advantages of magnesium alloys match the lightweight + shock resistance + heat dissipation needs of new energy vehicles, and with the downward trend in magnesium prices, they have potential in large automotive applications. High-end copper alloys are stabilizing in emerging application scenarios, with high-strength high-conductivity copper alloys enjoying the prosperity of automotive connectors, and copper-tungsten alloys (rocket fuel chamber lining materials) stepping onto the "trillion" industry track of commercial aerospace.

Risk Warning

Risks of U.S. inflation exceeding expectations and the Federal Reserve continuing to raise interest rates; risks of new production capacity being released beyond expectations, and copper ore grades exceeding expectations; domestic downstream real estate and other demand not meeting expectations, and overseas electrolytic aluminum production capacity being released beyond expectations. Risks of downstream new energy vehicles and AI demand not meeting expectations