Goldman Sachs has released a research report on commodities, updating its profit forecasts for China's basic materials and agriculture sectors to reflect market price movements year-to-date. The firm made minor adjustments to its commodity price forecasts, with profit estimates for the steel, cement, gold, and paper sectors being lowered, while those for copper and coal were raised. Regarding investment strategy, the bank expresses a more favorable view on coal and copper, while maintaining a cautious stance on aluminum and lithium.
For the steel and cement sectors, Goldman Sachs noted that while China's steel industry continues its efforts against internal competition and maintains long-term capacity reduction plans, the enforcement of capacity and production discipline in 2026 is expected to be delayed, potentially prolonging the period of depressed profit margins. Consequently, the bank lowered its 2026 profit forecast for Maanshan Iron & Steel Company Limited (HKG: 0323) by 12% to 40%, reducing its H-share target price from HK$2.5 to HK$2.2, while maintaining a "Neutral" rating. Simultaneously, it expects the 2026 loss for Angang Steel Company Limited (HKG: 0347) to widen from an initially projected CNY 4 billion to CNY 4.8 billion, leading to a cut in its Hong Kong stock target price from HK$1.2 to HK$1.15, with a "Sell" rating retained.
In the cement sector, weak construction demand has led to soft pricing in the second quarter. However, the bank anticipates demand will stabilize in the second half of the year as the central government increases support for infrastructure financing. Goldman Sachs reduced its 2024 profit forecasts for Anhui Conch Cement Company Limited (HKG: 0914), BBMG Corporation (HKG: 2009), China National Building Material Company Limited (HKG: 3323), and West China Cement Limited (HKG: 2233) by 0% to 9%. The H-share target price for Anhui Conch Cement was lowered from HK$28 to HK$27, with a "Buy" rating maintained. The bank also kept a "Buy" rating on China National Building Material, with its target price unchanged at HK$6. It maintained a "Neutral" rating on BBMG's H-shares, with the target price held at HK$0.7, and reiterated a "Sell" rating on West China Cement with a HK$1.1 target. Goldman Sachs reaffirmed its "Neutral" rating on China Resources Building Materials Technology Holdings Limited (HKG: 1313), keeping the target price at HK$1.3.
Goldman Sachs expects positive fundamentals for coal supply and demand, driven by increased demand from the coal chemical industry, reduced imports, and strong seasonal factors. The bank raised its 2026 spot price forecast for Qinhuangdao 5500 kcal thermal coal by CNY 70 per ton. Accordingly, it increased its 2026 profit forecasts for China Shenhua Energy Company Limited (HKG: 1088), China Coal Energy Company Limited (HKG: 1898), and Yankuang Energy Group Company Limited (HKG: 1171) by 9% to 17%. The H-share target price for Yankuang Energy was raised from HK$12.5 to HK$15. However, the bank downgraded its rating on Yankuang Energy's A-shares (SHA: 600188) to "Sell," while raising the A-share target price from CNY 16 to CNY 19. The H-share target for Shenhua was increased from HK$40 to HK$45 with a "Neutral" rating, and for China Coal Energy from HK$16 to HK$18 with a "Buy" rating.
Regarding gold prices, although Goldman Sachs lowered its 2026 gold price forecast by 5% to $4,809 per ounce, its global commodities team maintains a long-term positive outlook on gold. The bank reiterated its "Buy" rating on Zijin Mining Group Company Limited (HKG: 2899) with a target price of HK$51.
For copper stocks, Goldman Sachs raised the target price for MMG Limited (HKG: 1208) from HK$13.5 to HK$14, maintaining a "Buy" rating. The bank kept "Buy" ratings on Jiangxi Copper Company Limited (HKG: 0358) and China Molybdenum Co., Ltd. (HKG: 3993), with H-share target prices of HK$45 and HK$25, respectively.
In the aluminum sector, Goldman Sachs anticipates that new capacity expansion will accelerate from the second half of 2026, leading to a gradual normalization of aluminum spreads. The bank slightly lowered its 2026-2028 profit forecasts for Aluminum Corporation of China Limited (HKG: 2600) by 0% to 1%. The H-share target price for Chalco was maintained at HK$12.5, with a reiterated "Neutral" rating.
Comments