Great Wall Securities has released a research report maintaining an "Outperform" rating on the nonferrous metals industry. Driven by geopolitical tensions and supply chain security concerns, the strategic importance of metals and other critical materials is being elevated. Concurrently, the global base metals market is undergoing a structural reshaping of its long-term supply and demand dynamics. On the demand side, the accelerated energy transition, particularly from green industries such as new energy vehicles, photovoltaics, and wind power, is generating strong and sustained demand for copper and aluminum. On the supply side, factors including long-term underinvestment, declining ore grades, and extended commissioning cycles for new projects are leading to increasingly rigid supply constraints. While short-term prices may experience adjustments due to macroeconomic sentiment, the medium to long-term price center for base metals is expected to rise further. The main views of Great Wall Securities are as follows.
China's export value maintained stable growth in December, with a year-on-year increase of +6.6% (compared to +5.9% previously), although exports to the United States fell by -30% year-on-year (compared to -29% previously). The U.S. Consumer Price Index (CPI) growth rate held steady in December, with the monthly CPI up +2.7% year-on-year (unchanged from the previous reading) and the core CPI up +2.6% year-on-year (also unchanged).
In the aluminum sector, persistently high prices are potentially leading some processing enterprises to begin holidays early. Operating capacity in the primary aluminum industry increased by 5,000 tonnes week-on-week. This week, the operational capacity of primary aluminum enterprises stood at 44.25 million tonnes, up 5,000 tonnes from the previous week. Instantaneous profit per tonne for the industry exceeds 6,000 yuan. Calculated based on 100% self-owned power generation, the industry's instantaneous profit per tonne (excluding tax) is 6,053 yuan. High aluminum prices continue to suppress demand, leading to ongoing inventory accumulation. Domestic aluminum ingot inventories increased by 39,000 tonnes week-on-week.
For alumina, the trend of inventory accumulation persists, putting pressure on prices, while short-term production cuts and restarts occur simultaneously. According to Aladdiny statistics, the weekly operating capacity for alumina was 96.25 million tonnes, a slight increase of 40 tonnes week-on-week. Inventory levels continue to accumulate and remain at historically high levels, increasing by 75,000 tonnes week-on-week. The extent of instantaneous losses has widened. Calculated using domestic bauxite prices, the gross profit per tonne for alumina is -186 yuan/tonne, indicating a widening loss; calculated using Guinea imported bauxite prices, the gross profit per tonne is -85 yuan/tonne, indicating continued losses.
In the copper market, geopolitical tensions combined with supply reductions at the mine level are driving prices upward. Copper concentrate treatment and refining charges (TC/RCs) have declined again. On January 16, the SMM imported copper concentrate index (weekly) was reported at -46.53 USD/tonne, down -1.12 USD/tonne from the previous period. Operating rates at primary processing facilities have rebounded. This week, the operating rate for major domestic refined copper rod enterprises was recorded at 57.47%, up +9.65 percentage points week-on-week. The operating rate for copper wire and cable enterprises was 55.99%, down -0.59 percentage points week-on-week. Global inventories continue to accumulate, with total inventories reaching 1.0874 million tonnes, up +77,800 tonnes week-on-week and +602,700 tonnes year-on-year.
In the zinc sector, weak consumption is leading to the accumulation of visible inventories. Operating rates for primary processing are weaker compared to the same period last year. The weekly operating rate for galvanizing was recorded at 53.48%, down -0.91 percentage points week-on-week; the operating rate for zinc die-casting was 49.52%, down -0.38 percentage points week-on-week. Domestic and LME inventories remained stable. This week, total zinc ingot inventories in seven major areas tracked by SMM in China were 118,400 tonnes, down -100 tonnes from the previous week; LME inventories stood at 106,500 tonnes, down -275 tonnes from the previous week, remaining largely steady.
Risk warnings include risks associated with macroeconomic fluctuations, risks from policy changes, risks that industrial policies may fall short of expectations, risks of weaker-than-expected downstream consumption, and the risk that publicly available data used in the research report may contain outdated or untimely information.
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