Nonferrous metals have exploded once again! On the afternoon of February 3rd, Shanghai copper futures surged vertically, with the main contract CU2603 rocketing nearly 3% at one point. Copper stocks like Tongling Nonferrous Metals Group and Zijin Mining Group also experienced sharp upward moves. Precious metals and their corresponding stocks successively strengthened, driving the broader market higher. The gloom from the previous two trading sessions appeared to be fading. The rally was catalyzed by two key pieces of news, domestic and international: firstly, the China Nonferrous Metals Industry Association indicated it is studying the inclusion of high-volume, easily liquidated copper concentrate into reserve ranges; secondly, the United States is expected to initiate a key mineral reserve plan with initial funding of $12 billion. One securities firm commented that the domestic restocking volume could reach 7-8 million metric tons, aligning with safety inventory levels for a manufacturing nation in the context of deglobalization.
The news catalyst stems from reports. During a press conference on the 2025 operational performance of the nonferrous metals industry held by the China Nonferrous Metals Industry Association today, Vice Secretary-General Duan Shaofu stated that improving the copper resource reserve system involves two aspects: expanding the scale of national strategic copper reserves and exploring a commercial reserve mechanism, potentially trialing it with key state-owned enterprises through measures like fiscal interest subsidies. Furthermore, besides reserving refined copper, studying the inclusion of high-trade-volume, easily liquidated copper concentrate into the reserve scope is also under consideration.
Following this announcement, copper futures and related stocks surged significantly. Shanghai copper soared nearly 3%, COMEX copper jumped 3.65%, Zijin Mining Group rallied nearly 7%, Tongling Nonferrous Metals Group surged over 6% at one point, and Jiangxi Copper advanced nearly 5%.
External factors also provided a driver. According to foreign media reports, citing several senior government officials, the Trump administration plans to launch a strategic key mineral reserve program with an initial funding size of $12 billion. This move aims to shield US manufacturers from supply chain shocks while helping the US significantly reduce its foreign dependence on critical metals. A core mechanism in the plan's design involves: companies committed to purchasing a specific quantity of minerals at a fixed price must also agree to repurchase an equivalent amount at the same price in the future. The US government believes this mechanism will play a market-stabilizing role, helping to curb mineral price volatility.
The US dollar remains a key factor. During the Asia-Pacific session today, the decline in the US Dollar Index was also a significant reason for the surge in nonferrous metal futures and stocks. Analysts believe the dollar remains crucial to commodity trends. The new Federal Reserve Chair, Kevin Warsh, during his time as an economist, advocated for "parallel interest rate cuts and balance sheet reduction." His appointment is expected to support dollar strength in the short term and lead to a steepening of the US Treasury yield curve, exerting some pressure on precious metal prices.
Guangfa Securities believes that, from a medium-to-long-term perspective, the structural issues of US debt remain unresolved. Warsh's policies are more likely to slow the pace of the dollar's decline rather than fundamentally reverse its trend. Furthermore, as a Trump-appointed Fed Chair, it will be difficult for him to implement overly hawkish policies; while the market's short-term reaction might be excessive, the long-term impact is likely manageable. From the perspective of gold as an alternative, the dollar system is difficult to replace completely in the short term, as the international payment system, trade share, and military-technological strength still hold advantages. However, the rise in gold is beginning to challenge the foundation of dollar credibility. The US may take measures to maintain the dollar cycle, and Warsh's policy attempts are a preliminary action.
China International Capital Corporation (CICC) posits that for the gold trend to reverse, three conditions must be met: the Fed forcefully curbs financial expansion, US policy rebuilds trust, and the economy finds a new growth pillar. If these do not materialize, the trend is difficult to reverse. Calculating specific price targets is challenging due to a lack of anchors; historically, after two major breakouts, the subsequent gains were 9% and 200% respectively. Gold has entered uncharted territory not seen in 40 years.
Regarding the commodity cycle, CICC believes a supercycle requires demand-side drivers. Currently, only some commodities like copper exhibit structural shortage characteristics, while energy fundamentals remain in surplus, though marginal improvements are noteworthy. Copper prices are supported by supply bottlenecks, with the incentive price moving up to $11,000-$12,000 per metric ton by 2026, and short-term support at $11,500-$12,000/ton. Currently, negative feedback from downstream copper demand is emerging, while oil consumption is recovering from its 2025 trough. Copper shortages are amplified by the siphoning of exchange inventories, whereas oil surpluses are being absorbed by strategic and commercial restocking. At this stage, there might be long opportunities in the energy sector, while pricing for nonferrous metal shortages may already be somewhat full.
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