Guolian Securities 2025 Non-ferrous Metal Investment Strategy: Supply Constraints, Bullish on Cyclical Upswing

According to the Zhitong Finance APP, Guolian Securities released a research report stating that looking ahead to the non-ferrous metals industry in 2025, as developed economies represented by the Federal Reserve begin a rate-cutting cycle, ample liquidity will be favorable for gold; gold has anti-inflation properties, and under the backdrop of rising re-inflation expectations in the United States, the allocation value of gold is highlighted, which is expected to drive gold prices to continue rising. In addition, the rising global geopolitical risks, intensified great power competition, and major central banks continuously increasing their gold reserves are all expected to push the gold price center further upward. The supply-demand gap for electrolytic aluminum is gradually becoming apparent, and the upward channel for aluminum prices will become smoother. The tension at the copper mine end is being transmitted to the smelting end, and we are optimistic about the continued rise in copper prices.

Guolian Securities' main viewpoints are as follows:

Since the beginning of the year, non-ferrous metals have seen significant gains, with institutions increasing allocations in copper, aluminum, and gold

From the beginning of 2024 to December 30, 2024, the Shenyin Wanguo non-ferrous metals industry index has increased by 6.10%, ranking 15th among the 31 Shenyin Wanguo first-level industry indices; among them, the industrial metals, new metal materials, and small metals sectors have seen the highest increases, with increases of 15.27%/10.71%/9.84%, respectively; the energy metals sector has seen the largest decline, with a drop of 18.48%. In terms of fund holdings, the allocation ratios for the non-ferrous metals sector in 2024 Q1-Q3 were 6.04%/6.11%/5.41%, with allocation ratios at historically high levels; among them, the copper, aluminum, and gold sectors have seen significant increases in institutional allocations, with market values of holdings in Q3 2024 being 38.455 billion, 17.885 billion, and 17.340 billion yuan, respectively.

Aluminum: The supply-demand gap for electrolytic aluminum is gradually becoming apparent, and the upward channel for aluminum prices will become smoother

The domestic electrolytic aluminum production capacity is nearing its ceiling, and future new capacity is extremely limited; the concentrated resumption of production has come to an end, and the power supply issues in the southwestern region have not yet been completely resolved, leaving the possibility of production cuts in the future; it is expected that the growth rate of electrolytic aluminum supply will significantly decline in 2025. It is estimated that the national supply-demand gap for electrolytic aluminum from 2024 to 2026 will be +20,000/-400,000/-470,000 tons, with supply and demand remaining tight in 2024, and the gap continuing to widen in 2025-2026. The electrolytic aluminum industry experienced dual pressure tests from supply and demand in 2024, and aluminum prices remained high; the supply-demand gap for electrolytic aluminum is expected to gradually become apparent in 2025, making the upward channel for aluminum prices smoother.

Copper: Tension at the mine end is being transmitted to the smelting end, and we are optimistic about the continued rise in copper prices

In the short term, copper mine supply is constantly disturbed by factors such as power supply tension in major production areas and production accidents; in the medium to long term, declining resource grades and insufficient capital expenditure on mining are constraining copper mine supply. It is estimated that global copper concentrate production from 2024 to 2026 will be 22.79 million, 23.19 million, and 23.70 million tons, respectively, with year-on-year increases of 430,000, 400,000, and 510,000 tons. The increase in supply at the mine end is far less than the increase in smelting capacity, and in 2025, the long-term price of copper concentrate smelting processing fees will significantly decline, leading smelting plants to potentially reduce production substantially, with the tension at the mine end gradually being transmitted to the smelting end. From 2025 to 2026, the global refined copper supply surplus will continue to narrow and turn into a shortage, supporting the continued rise in copper prices.

Precious Metals: The rate-cutting cycle combined with re-inflation expectations supports the strengthening of gold prices With the overseas developed economies, represented by the Federal Reserve, entering a rate-cutting cycle, ample liquidity will be favorable for gold; gold has anti-inflation properties, and under the backdrop of rising re-inflation expectations in the United States, the allocation value of gold is highlighted, which is expected to drive gold prices further upward. In addition, the rising global geopolitical risks, intensified great power competition, and major central banks continuously increasing their gold reserves are also expected to push the gold price center further up. Silver, resonating with both financial and commodity attributes, has greater upward elasticity in the context of an expanding supply-demand gap.

Recommended Targets

Industrial Metals: Aluminum Sector: Aluminum Corporation of China (601600.SH), China Hongqiao Group (01378), Yunnan Aluminum Co., Ltd. (000807.SZ), Shenhuo Co., Ltd. (000933.SZ). Copper Sector: Zijin Mining Group (601899.SH), Luoyang Molybdenum Co., Ltd. (603993.SH), Jiangxi Copper Co., Ltd. (600362.SH), Minmetals Resources (01208), Jincheng Mining (603979.SH), Tongling Nonferrous Metals Group (000630.SZ).

Precious Metals: Gold Sector: China National Gold Group (600489.SH), Chifeng Jilong Gold Mining Co., Ltd. (600988.SH), Shandong Gold International (000975.SZ). Silver Sector: Xinyi Silver Tin (000426.SZ).

Risk Warning

Risks from the macroeconomic environment; Federal Reserve rate cuts not meeting expectations; geopolitical and policy risks; downstream demand not meeting expectations