Nonferrous metals have exploded in another major rally! On the afternoon of February 3rd, Shanghai copper futures surged vertically, with the March 2026 contract (CU2603) skyrocketing by nearly 3% at one point. Copper-related stocks such as 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 indices higher. The gloom from the previous two trading sessions appears to be dissipating. The rally was catalyzed by two key pieces of news, one domestic and one international. Firstly, the China Nonferrous Metals Industry Association suggested researching the inclusion of copper concentrate, which has large trade volumes and is easily liquidated, into national reserves. Secondly, the United States is expected to initiate a critical mineral stockpiling program with initial funding of $12 billion. One securities firm commentary suggested that the scale of domestic inventory replenishment could reach 70-80 million metric tons, aligning with the safety stock levels appropriate for a manufacturing nation in the context of deglobalization. Two major news items are driving the market. According to media reports, at 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 efforts to improve the copper resource reserve system will focus on two areas: expanding the scale of national strategic copper reserves and exploring a commercial reserve mechanism, potentially trialed by key state-owned enterprises with support like fiscal interest subsidies. Furthermore, besides stockpiling refined copper, research into including high-volume, easily liquidated copper concentrate in reserves is also being considered. Following the release of this news, both copper futures and related stocks experienced significant gains. Shanghai copper surged nearly 3%, COMEX copper jumped 3.65%, Zijin Mining Group soared close to 7%, Tongling Nonferrous Metals Group at one point rallied over 6%, and Jiangxi Copper advanced nearly 5%. External factors also provided a catalyst. According to foreign media reports citing several senior government officials, former President Trump plans to launch a strategic critical mineral reserve program with an initial funding scale of $12 billion. This move aims to shield U.S. manufacturers from supply chain shocks while helping the U.S. significantly reduce its foreign dependence on critical metals. A core mechanism in the plan's design involves the government committing to purchase a specific quantity of minerals at a fixed price from companies, which in turn must agree to repurchase the same quantity at the same price in the future. The U.S. government believes this mechanism will stabilize the market and help curb price volatility for these minerals. The U.S. dollar remains a key factor. During the Asia-Pacific trading session today, the decline in the U.S. Dollar Index was also a significant reason for the surge in nonferrous metal futures and stocks. Analysts believe the dollar's trajectory remains pivotal for commodity trends. The new Federal Reserve Chair, Kevin Warsh, during his time as an economist, advocated for "concurrent interest rate cuts and balance sheet reduction." His appointment is expected to support a stronger U.S. dollar in the short term, leading to a steeper U.S. Treasury yield curve and exerting some downward pressure on precious metal prices. Guangfa Securities believes that, from a medium-to-long-term perspective, the structural issues with U.S. 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 market reactions might be excessively volatile in the short term, the long-term impact is likely manageable. From the perspective of gold as an alternative, the U.S. dollar system is difficult to completely replace in the short term, as it maintains advantages in international payment systems, trade share, and military/technological prowess. However, the rise in gold prices is beginning to challenge the foundation of dollar credibility. The U.S. may take measures to maintain the dollar's cycle, and Warsh's policy attempts are a preliminary action. China International Capital Corporation (CICC) posits that for the gold bull trend to end, three conditions must be met: the Fed forcefully curbs financial expansion, U.S. policies rebuild trust, and the economy finds new growth drivers. If these do not materialize, the trend will be hard to reverse. Calculating specific price targets is challenging due to a lack of clear anchors; historically, after two major breakouts, gold rose by 9% and 200% respectively. Gold has entered uncharted territory not seen in 40 years. Regarding the broader commodity cycle, CICC believes a super-cycle requires demand-side drivers. Currently, only certain 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 projected to shift to $11,000-$12,000 per metric ton by 2026, and short-term support levels at $11,500-$12,000. Currently, negative feedback from downstream copper demand is already evident, while oil consumption is recovering from its 2025 trough. Copper shortages are being amplified by the siphoning of exchange inventories, and oil surpluses are being absorbed by strategic and commercial stockpiling. At this stage, there may be opportunities for long positions in the energy sector, whereas pricing for nonferrous metal shortages might already be somewhat fully reflected.
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