Following the opening of the A-share market in the Lunar Year of the Horse, the most prominent performers were not the humanoid robots featured during the Spring Festival Gala nor the AI application sector, but rather a significant strengthening in resource stocks. Sectors such as non-ferrous metals, chemicals, and lithium mining have emerged as the leading forces in this phase of the rally. Based on recent market dynamics and analysis from multiple institutions, the current upswing in the non-ferrous metals sector is driven not by a single factor, but by a deep convergence of three logics: macroeconomic, industrial, and monetary. Last year, the non-ferrous metals sector was already the top performer in the market, even surpassing many technology sectors. The current recovery logic is shifting from past event-driven movements toward a systematic re-rating based on long-term value.
First, from a macroeconomic perspective, the market has entered the second stage of a bull market, transitioning from sentiment-driven movements in the first stage to earnings-driven momentum. Domestic policies aimed at curbing internal competition and expanding domestic demand are continuously being reinforced, while reflation expectations are gradually heating up, providing significant opportunities for non-ferrous metals, which have strong cyclical characteristics. As key indicators of macroeconomic health, industrial metals like copper, aluminum, and zinc are benefiting from synchronized improvements in economic recovery and inflation expectations. Therefore, their performance in the second stage of the bull market remains highly promising.
Second, from an industrial logic standpoint, this rally results from a combination of supply constraints and new types of demand. On the supply side, global resources are characterized by an oligopolistic structure, while domestic supply-side reforms, resource controls, and export restrictions have significantly reduced supply elasticity. On the demand side, emerging sectors such as AI computing, photovoltaics, new energy vehicles, and defense are generating substantial and inelastic demand for metals. Against a backdrop of limited supply and re-evaluated demand from high-tech industries and strategic value, strategic minor metals like tungsten, rare earths, antimony, and tin possess considerable investment potential. Concurrently, traditional commodity supply growth is weak, with factors like production capacity ceilings and declining ore grades limiting the expansion of metals such as copper and aluminum. Strong demand from new energy, power grid investments, and AI data centers further reinforces the long-term logic for non-ferrous metals; for example, a single new energy vehicle uses approximately four times more copper than a traditional vehicle.
Third, from a monetary logic perspective, abundant liquidity and a weak US dollar cycle are jointly driving up non-ferrous metal prices. The Federal Reserve is currently expected to enter an interest rate-cutting cycle, leading to a more accommodative global liquidity environment that favors US dollar-denominated international commodities. With the term of the current Fed Chair concluding in May, a newly nominated chair could initiate the first rate cut as early as June, with at least two 25-basis-point cuts anticipated for the year, potentially even more. In this environment of ample liquidity, increased trading activity further amplifies price elasticity for non-ferrous metals, boosting the overall sector's performance.
Benefiting from a weak dollar, safe-haven demand spurred by geopolitical risks, and expectations for monetary easing, precious metals like gold and silver are also continuing their upward trend. Before the Spring Festival, international gold prices briefly broke through $5,600 per ounce to hit a record high before retreating under profit-taking pressure. However, renewed international tensions during the holiday, including stalled US-Iran negotiations and US threats of military action, significantly heightened risk aversion, pushing gold prices back above $5,000 per ounce. This also indicates a trend of increasing US dollar supply. Against a backdrop of global central banks and institutions selling US Treasuries to increase gold holdings, the long-term upward trend for international gold prices is expected to persist. Consequently, a positive outlook on precious metals like gold and silver has been maintained in recent years, with the core logic being the trend of de-dollarization. For gold investment, excessive focus on short-term fluctuations is unnecessary; corrections after significant gains are normal. Gold is more suitable as a long-term allocation, using price dips as opportunities to build positions for extended holding periods. A previous recommendation to allocate at least 20% of a portfolio to gold-related assets—including physical gold, paper gold, gold ETFs, gold-themed funds, and gold stocks—remains valid.
Beyond the non-ferrous metals sector, another area showing notable recent strength is the chemicals sector. Overall, the current upswing in the chemical industry is supported by strong sustainability fundamentals, driven not by short-term events but by a combination of systemic supply-side optimization, structural demand surges, and stabilized costs. After a four-year downturn, the chemical industry stands at the start of a new cycle. The economic logic for various chemical sub-sectors can be analyzed in detail across five aspects:
First, phosphorous chemicals, as a strategic resource, are seeing their strategic importance rise. New energy demand is inelastic, and the US has classified phosphorous chemicals as a critical strategic material, reshaping their strategic status. High growth in new energy vehicles and energy storage continues to drive demand for upstream phosphate rock. Second, fuel intermediates face irreversible supply constraints. Prices for core intermediates have surged due to environmental policies and high technical barriers, with supply elasticity weakening during peak demand seasons. Combined with the traditional high-demand spring season, leading companies are reinforcing downstream price increase expectations through successive intermediate price hikes. Third, in synthetic fibers, supply optimization amid efforts to curb internal competition and low inventory levels are core drivers for the sector's rise. Coordinated production cuts are progressing orderly, operating rates remain low, and inventory levels are at historic lows. Post-holiday downstream resumption of work and seasonal stockpiling are creating room for price elasticity. Fourth, for TMP-related materials, supply-demand mismatches and cost pressures are driving price increases. Unexpected domestic production cuts and maintenance have created short-term supply gaps, while overseas capacity continues to exit, sustaining supply contraction trends. Rising raw material costs are further strengthening manufacturers' pricing intentions. Fifth, magnetic materials, including semiconductors and electronic materials, are experiencing demand explosions from downstream sectors like semiconductors and AI robotics, accelerated by domestic substitution and AI-driven needs. Against a geopolitical backdrop, the importance of self-sufficiency in key materials is increasingly emphasized. Therefore, the current chemical sector rally is fundamentally supported and is not expected to be a short-term fluctuation.
Should US-Iran military negotiations break down, safe-haven sentiment could intensify further, boosting precious metals like gold and silver while providing support for some non-ferrous metals.
A third noteworthy direction is lithium mining concept stocks. These have shown significant gains, with several individual stocks rising consecutively, primarily influenced by supply contraction. Zimbabwe's immediate suspension of lithium concentrate and raw ore exports, coupled with lithium battery production entering its peak season and demand hitting new highs, are key factors. Combined with tightening lithium supply and low inventory levels, lithium prices have potential for further increases. To enhance the economic benefits of local resources, African governments have been urging mining companies to refine minerals domestically. According to official data, Zimbabwe holds one of Africa's largest lithium reserves and is a top global producer. With reserves of approximately 126 million tons, changes in Zimbabwe's export policies provide clear support for lithium carbonate prices, benefiting related sectors. As electric vehicle market penetration continues to rise, exceeding 50% domestically, future demand for lithium resources is expected to keep growing, underpinning the recent strength in lithium mining stocks.
From a broader market perspective, the current trend is in the middle phase of a slow, long-term bull market—the second stage. Unlike the sentiment-driven first stage, the second stage requires deeper analysis and a focus on sectors with sustained high growth potential or potential technological breakthroughs, particularly in technology and resources. Resource assets that are difficult to replace by AI, or may even benefit from AI development, remain valuable for continued exploration in the Year of the Horse.
In summary, the current rally in resource sectors is not driven by short-term themes but results from the combined effects of macroeconomic cycles, industrial structure, and monetary conditions. In the second stage of the bull market, investors should place greater emphasis on fundamentals and long-term logic, seeking genuine growth opportunities from the integration of resources and technology.
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