Hualong Securities released a research report stating that the strong performance and optimistic outlook for the U.S. economy, coupled with resilient domestic copper demand projected for 2026, are shifting the copper supply-demand mismatch from expectation to reality, fueling high market trading activity and intense bullish sentiment. However, as U.S. copper prices surge and Shanghai copper breaks through the 100,000 yuan per ton barrier to set a new record high, attention should be paid to the risks of short-term price volatility. The firm maintains its Recommended rating for the sector.
Key viewpoints from Hualong Securities are as follows: On December 26th, prices of major metals continued to climb, with significant gains in gold, silver, and copper. COMEX copper rose 4.96% to $5.8515 per pound, while Shanghai copper increased 3.33% to 101,380 yuan per ton.
Amid various favorable factors, capital exhibits strong bullish意愿, driving Shanghai copper to a new historical peak. Currently, supply-side constraints at the mine level and resource nationalism form the fundamental backdrop for copper supply, with supply chain disruptions and restructuring exacerbating tightness, leading to an extremely uneven global distribution of copper inventories. As major economies gradually stabilize and recover, the supply-demand mismatch is expected to progressively transition from anticipation to actuality. Against this backdrop, short-term market bullish sentiment is robust, propelling upward price movements for copper and other metals.
Moderately optimistic economic growth expectations for 2026 support an upward trajectory for copper price benchmarks, though short-term volatility risks warrant caution. The Federal Reserve's early December FOMC meeting also expressed optimism about the 2026 economy, revising upwards its economic growth forecast from September and projecting real GDP growth of 2.1%-2.5% for 2026. According to predictions from the 2025 Asian Copper Week, China's copper demand in 2026 is expected to remain resilient. The bank believes that favorable economic expectations will aid the growth of industrial metal demand and a continued recovery in fundamentals, hence it is optimistic about a continued upward trend in the copper price benchmark for 2026. On the other hand, due to the strong performance of the U.S. economy, concerns about inflation have increased, which could subsequently influence the Fed's future interest rate cut expectations and thereby impact copper prices. In the short term, before the release of updated economic data, high market trading fervor may push copper prices even higher; however, as the economy remains in a recovery cycle, vigilance against the risk of high-price volatility is necessary.
Investment Recommendation: It is advised to focus on leading industrial metal companies such as Zijin Mining Group, China Molybdenum Co., Ltd., Western Mining Co., Ltd., Tongling Nonferrous Metals Group, Yunnan Copper Industry, Jiangxi Copper Company, and JCHX Mining Management.
Risk Warning: Potential setbacks in U.S. economic recovery; risks associated with changes in the Federal Reserve's interest rate cut pace; delays in the effectiveness of domestic policies; geopolitical risks; risks of high volatility in copper prices; risks related to data citation.
