Shenwan Hongyuan Group has released a research report stating that amid fluctuating geopolitical tensions in the Middle East and rising expectations for a Federal Reserve rate hike, bulk metals are generally under pressure. However, benefiting from the rapid development of the AI industry, computing power metals are facing a significant supply shortfall, promising sustained high demand. Driven by long-term trends of deglobalization and major AI advancements, the fundamental investment thesis for precious and base metals remains unchanged. The anticipation of rate hikes offers a strategic window for long-term positioning, while strategic and computing power metals continue to see upward momentum. The key viewpoints from Shenwan Hongyuan are outlined below.
Precious Metals: Short-Term Pressure, Long-Term Outlook Remains Positive
In the short term, rising energy prices due to Middle East conflicts and heightened rate hike expectations have led to higher U.S. Treasury yields and a stronger dollar, putting downward pressure on gold prices. However, as gold prices correct, global central banks are accelerating their gold purchases. Once tensions between the U.S. and Iran ease, precious metals are expected to revert to their long-term upward trajectory, with silver potentially exhibiting greater price elasticity.
Base Metals: Bullish Trend Unchanged
For copper, the pace of restarting major mines has fallen short of expectations, with minimal global mine supply growth anticipated for 2026. Tariff expectations are driving continuous inventory accumulation on the COMEX. The tight supply-demand balance supports a positive outlook for copper prices.
For electrolytic aluminum, domestic production in China is nearing its capacity ceiling, while short-term recovery from production cuts in the Middle East remains challenging. Growth in new energy and power demand is offsetting declines in traditional sectors, suggesting aluminum prices could maintain elevated levels in 2026. A trend towards tighter policies on overseas mining may support a recovery in the cost-driven price floor for alumina.
Energy Metals: Positive Developments Emerging
Driven by robust growth in energy storage demand, the lithium carbonate industry's reversal cycle is arriving earlier than expected. Cobalt supply has contracted significantly, creating a pronounced supply deficit and supporting continued price increases. Nickel prices have clear cost support, with supply disruptions intensifying at the margins.
Strategic Metals: Persistent Supply Disruptions, Diversified Demand
Against the backdrop of deglobalization, the value of strategic minor metals is undergoing a continuous reassessment. High oil prices are accelerating the adoption of new energy vehicles, boosting demand for both light and heavy rare earths, with MLCCs potentially expanding demand for heavy rare earths further. Tungsten supply is constrained by quotas, limited over-mining, and grade restrictions, while demand remains strong in sectors like PCBs and defense. Tin, as a computing power metal, is poised for further price gains due to the high growth expected in AI server cabinets. Indium phosphide substrates, as a primary raw material for optical modules, enjoy high demand certainty, promising a positive outlook for indium prices.
Risk Warnings
Key risks include macroeconomic performance falling below expectations, easing of supply bottlenecks, and demand from areas like AI and energy storage failing to meet projections.
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