According to a research report from Guotai Haitong Securities Co., Ltd. (GTHT), the weaker-than-expected US non-farm payrolls for June, coupled with stable core CPI and PCE data, have led the market to lower its confidence in a strengthening US economy. This, combined with recent dovish signals, is providing support for precious metals prices, suggesting a gradual approach of a favorable long-term entry point.
The report suggests multiple catalysts are converging for the non-ferrous metals sector. Base metals like copper, aluminum, and tin benefit from inventory drawdowns and AI demand expectations, while the tight supply-demand dynamic for energy metals persists. Rare earth prices continue to recover, and the value of strategic metals is becoming increasingly prominent. The key views from Guotai Haitong Securities Co., Ltd. are outlined below:
Precious Metals: Weak Non-Farm Data Prompts Active Positioning
The weaker-than-expected US June non-farm payrolls, alongside stable core inflation figures, have reduced market conviction in US economic strength. Dovish commentary further supports precious metals prices. The long-term thesis for precious metals remains solid, indicating a gradually emerging opportunity for long-cycle investment.
Copper: Easing Rate Hike Expectations Benefit Valuation Recovery
While expectations for US rate hikes have moderated, the pending decision on US refined copper tariffs suggests short-term copper prices may remain volatile. For equities, valuations of copper resource stocks have seen some recovery, with profit expectations fluctuating alongside copper price forecasts. Focus is also on new material sector companies benefiting from the AI industry chain, which offer greater earnings elasticity.
Aluminum: Overseas Supply Expansion Expected, Domestic Inventory Drawdown Accelerates
On the supply side, overseas aluminum smelter restarts and new projects are progressing intensively. On the demand side, the operating rate of leading aluminum processors fell 0.4 percentage points month-on-month to 62.6%; the June aluminum processing PMI was 46.6%, indicating pressure across domestic demand segments. Regarding inventories, SMM data shows domestic social inventories of primary aluminum at 1.13 million tonnes, a drawdown of 75,000 tonnes from the previous period.
Tin: Accelerated Inventory Drawdown Supports Prices, AI Demand Expectations Boost Equity Valuations
Indonesia's tin ingot exports showed marginal improvement in June but remained significantly lower year-on-year. Domestic tin ingot inventories have drawn down noticeably, supporting tin prices. Demand-wise, the traditional semiconductor cycle is gradually recovering, while demand from AI computing, high-end storage, and advanced packaging continues to materialize, supporting consumption of tin solder and electronic materials. For equities, focus is on companies with high earnings elasticity benefiting from AI applications and surging demand for high-end tin materials.
Energy Metals: Supply Narrative Fluctuates, Tight Supply-Demand Dynamic Unchanged
Lithium Carbonate: Production fluctuated last week while inventories continued to draw down. The supply outlook is becoming clearer with the potential restart of a major Jiangxi mine and arrivals of Zimbabwean concentrate, pointing to easing supply expectations. However, demand-side production schedules continue to rise sequentially, keeping the overall balance tight.
Nickel: Indonesia may release a second batch of nickel ore quotas mid-year, with nickel supply moving from surplus towards balance. Falling sulfur prices suggest a potential for a slow upward shift in the nickel price center.
Rare Earths: Prices Continue to Recover
This is attributed to recovering demand and production cuts at scrap recycling enterprises. From a medium-to-long-term perspective, the firm remains positive on the investment value of rare earths as a critical strategic resource.
Strategic Metals: Value Becoming Prominent
Tungsten: Spot price softness limits short-term upside; focus on opportunities from high-end tungsten industry chain upgrades. After a rapid rebound in June, tungsten prices corrected. Increased auction volumes from mines added to circulating supply, but high-grade tungsten concentrate remains tight, with high long-term contract prices providing floor support. Demand has entered a seasonal lull, with weak high-price transactions for APT and weaker restocking for powder and cemented carbide. Overseas, European scrap inventories are gradually clearing with rising offers. For equities, it is advised to look beyond short-term price volatility and focus on companies with resource security, integrated industry chain layouts, and those benefiting from rising demand in high-end PCBs and cemented carbide.
Uranium: The June long-term contract price for natural uranium reached a record high of $95.5 per pound. Rigid supply and nuclear power development sustain a long-term supply-demand gap, supporting expectations for further uranium price increases.
Tantalum: Supply-demand mismatch supports tantalum prices. Tantalum concentrate prices are gradually rationalizing amid geopolitical volatility and supply disruptions, but the globally tight supply structure remains unchanged. Coupled with rising terminal demand from emerging industries like AI, tantalum prices are expected to remain elevated.
Key Risk Factors
Downstream demand weaker than expected; significant supply-side releases; Federal Reserve interest rate cuts falling short of expectations.