Non-ferrous metals have risen over 70% this year, leading the entire industry. How long can this trend last?

Since the beginning of this year, non-ferrous metals have undoubtedly been one of the hottest sectors, with a price increase of over 70% as of October 14, 2025, ranking first among all industries. So, what are the core drivers for non-ferrous metals this year? From an industry perspective, there is indeed solid intrinsic logic supporting it, such as supply contraction, but a single industry logic is difficult to determine the overall operational direction; from a macro perspective, top-down industry comparisons play a crucial role, but this can easily overlook many industry-level details. Therefore, as the first content of the dialogue between the strategy team and the industry team, we will raise questions from different perspectives and answer each other's confusions about non-ferrous metals. The audio of the discussion will be available on Jinmen Finance.

The following four questions are responses from the strategy team to the questions raised by the metals team:

Metals Team: How long will this round of inventory replenishment last? When will the funding style begin to change?

Strategy Team: From the inventory cycle perspective, there was a round of inventory replenishment in the U.S. from March to May 2024. Although it has not yet transmitted to upstream resource products, industrial metals represented by copper, which have both industrial and financial attributes, are sensitive to downstream inventory replenishment signals, and prices of upstream resource products also saw a significant increase during this period. However, both in terms of sustainability and elasticity, this round of U.S. inventory replenishment is overall relatively weak (starting from June 2024, U.S. manufacturers' inventory began to weaken marginally), and the underlying reason is the suppressive effect of the high-interest-rate environment on manufacturing. At that time, the U.S. economy was in a phase of dislocation between the manufacturing and service sectors, characterized by a "strong service sector and weak manufacturing" pattern, where the relatively strong service sector caused service inflation to remain sticky, while the interest-sensitive manufacturing sector performed weakly under interest rate suppression, leading to a decline in commodity inflation. However, once entering the inventory replenishment rebound cycle, it can easily trigger expectations of policy tightening, which in turn limits the strength of replenishment.

Nevertheless, the sustainability of the latest round of inventory replenishment may exceed market expectations, closely related to the current shift in the driving logic of the U.S. economic structure. Unlike before, the current service sector has shown a trend of marginal weakening, indicating a late-stage stagflation or even a potential recession; meanwhile, the manufacturing sector is in the early stages of recovery, with the latest data showing that the price index has not further increased and may even be marginally declining, while manufacturing activity has entered a state of marginal recovery. As the Federal Reserve begins its interest rate reduction cycle, the manufacturing demand that was suppressed under the previous high-interest-rate environment may gradually be released, so we will also see the initiation of the downstream inventory replenishment cycle. Compared to the weak replenishment in 2024, this round of replenishment is expected to not only start relatively quickly but also last significantly longer.

Of course, the biggest reason for the divergence between the manufacturing and service sectors is the fiscal orientation of overseas countries in recent years, which has focused more on social welfare and transfer payments. However, this orientation is now undergoing significant changes, as mainstream countries in Europe and America have begun to encourage corporate investment or directly support military and infrastructure construction.

![](https://mmbiz-qpic.wscn.net/mmbiz_png/8npuEFsWaVR5LsNmgGoEVJUOZ31REQASh6LycoBxZtjP4M3W3soV5Nj6SUJlTLs4xCiaFv1E8H3djeSD6omkJOQ/640? From the perspective of funding style, we are more inclined to believe that we have entered a rebalancing process at this stage. We focus on two aspects: ① After the initiation of interest rate cuts overseas, the rebound of commodity inflation sensitive to interest rates, followed by the transmission process of service inflation (the "re-inflation" process), will potentially impact the cyclical profit expectations and changes in the liquidity environment; ② For domestic investors, the profit indicators of A-share listed companies are more critical, with one of the core observation indicators being China's export price index. Currently, the PPI may stabilize due to external demand, similar to the situation in 2005-2006, when: overseas commodity demand rebounded → export order prices increased → exporters replenished raw materials → domestic bulk commodities and PPI lagged in recovery. This "demand abroad, inventory first" transmission sequence makes export prices a leading indicator for the entire chain. At present, overseas demand for equipment has shown signs of recovery, and the domestic "anti-involution" is also continuing to advance. Under domestic supply constraints, structural optimization combined with the gradual recovery of overseas demand makes the sustainability of profit recovery for Chinese enterprises worth looking forward to. It is expected that in the next 2-3 quarters, overseas markets may welcome a "re-inflation trade," at which point market style switching will occur more broadly. In the early stages of commodity inflation recovery, the market style should be in a rebalancing phase.

Metal Team: How to Understand the Macro Driving Logic of "Resources → Manufacturing → Technology"? What Leading Indicators Can Signal the Turning Point for Non-ferrous Metals?

Strategy Team: From the perspective of stock investment, stocks that dominate for a period often correspond to sectors in GDP that are easier to expand or sectors that dominate in the profit distribution of listed companies. From the perspective of stock price patterns, since 60 trading days is exactly one quarter and also corresponds to one profit cycle for enterprises, it often refers to the long-term slow changes or short-term drastic changes that can reach above the 60-day moving average level. Therefore, this cycle can serve as an important reference for observing sector rotation. Specifically, regarding resources, manufacturing, and technology: ① Resources: As consumables for enterprise production and operation, they are directly linked to production and investment construction activities. When enterprises are more inclined to produce or invest in construction, resource consumption will significantly increase, typically seen in the lithium carbonate during the upward cycle of the new energy industry in 2020-2021. ② Manufacturing: Its production is highly dependent on resource supply. When resource supply is sufficient and does not excessively erode manufacturing profits, while downstream demand is favorable, resources and manufacturing may rise simultaneously. Conversely, when the manufacturing industry is in a supply clearing phase, or the industry itself belongs to an emerging field (rapid supply expansion but faster demand growth), the manufacturing sector may experience significant excess returns. ③ Technology: When midstream manufacturing lacks the logic of supply expansion and demand explosion (due to marginal slowdown in production investment and a corresponding decrease in resource demand), if there are technological breakthroughs in the technology sector, it often becomes the market focus and gradually becomes a new growth point for the economy However, after the development of certain technology industries matures, they will also transition to "technology manufacturing." Of course, during this process, there will be a re-matching of cycles, such as the capital expenditure cycle that is often used in industry analysis. Generally, the capacity cycle construction in mining takes longer than in manufacturing, which further affects the supply-demand matching rhythm of the two.

In the domestic market, from 2023 to 2024, the upstream resource products and dividend sectors are expected to perform better in terms of stock prices. The core reason is that China's electricity consumption growth rate exceeds the industrial added value growth rate, forming a "energy consumption-manufacturing output" gap, which means that the energy consumption growth rate is higher than the output growth rate, leading to a narrowing of profit margins for manufacturing enterprises. During this period, the power system directly benefited from the growth in energy demand and performed relatively well; non-ferrous metals also benefited, but the Sharpe ratio of domestic non-ferrous stocks was not as high. In the overseas market, due to the high interest rate environment leading to weak manufacturing activity, there is no need for more resource products due to a rebound in investment activities, and non-ferrous metals are not favored by the market. Until the second and third quarters of 2024, this also became an important turning point for the market: dividend assets represented by coal and electricity began to decline, primarily because domestic manufacturing enterprises started to clear out, and some enterprises' profits began to bottom out. However, due to the relatively slow clearing speed, the sector lacked elasticity.

In the global market, a different scenario emerged: the United States, as a service-dominated economy, has experienced a differentiation pattern of "strong services, weak manufacturing" over the past two years. Due to the high correlation between the profits of American technology companies and the prosperity of the service industry (the profits of American services are actually from technology companies), combined with technological breakthroughs at the industrial level of American technology companies, multiple factors have driven the continuous growth of profits for American technology companies. This trend has gradually transmitted to the A-share market. When the domestic economy is in a phase of weak demand after a slowdown in resources and manufacturing, under the reflection of overseas technology, the broad technology sector in A-shares has shown a high degree of correlation with overseas technology stocks and has also achieved significant excess returns during this period.

The future turning point may manifest as the resurgence of global resource products, driven primarily by the upward repair of the global manufacturing cycle. It is recommended to focus on manufacturing PMI or the manufacturing PMI/service PMI ratio. Taking the copper-gold ratio as an example, historical experience shows that the global manufacturing PMI is highly positively correlated with the copper-gold ratio, and currently, the value of the copper-gold ratio is significantly lower than the historical PMI level. This indicates that as manufacturing activity rises in the future, industrial metals represented by copper may have greater repair elasticity. Therefore, under the background of a comprehensive launch of global manufacturing investment activities in the medium term, our focus should not be on when the non-ferrous sector will show a downward turning point, but rather on when resource products will welcome an upward turning point in the dominant market. As for the true downward turning point of non-ferrous metals, based on historical experience: commodity prices often rise due to supply-demand contradictions, but when upstream prices rise and cause comprehensive and severe pressure on the profits of midstream and downstream enterprises, This indicates that the economy has entered a stagflation phase. From an overseas perspective, when commodity inflation spreads back to service inflation, it will trigger stronger expectations for policy tightening or demand destruction effects, at which point the downward turning point for resource products may also be approaching.

Metal Team: From a macro perspective, what changes may affect the demand for industrial metals represented by copper?

Strategy Team: In the current economic environment, although the global economy has been resilient over the past 2-3 years, it is primarily driven by the service sector, while manufacturing investment activities are relatively weak. In this situation, even if the global economy continues to grow, the weak manufacturing investment activities lead to relatively low physical consumption corresponding to unit GDP, resulting in a lack of strong support for metal demand. However, this pattern may undergo a fundamental change in the future: against the backdrop of global central banks gradually entering a loosening cycle, the global economy may shift towards a manufacturing-driven logic. It is expected that the global manufacturing cycle will gradually welcome recovery in the next six months. When manufacturing activities are stronger than service activities, it often leads to an increase in resource consumption per unit of total output. According to our calculations, in years when manufacturing is relatively strong, the resource consumption per unit of total output is on average 4.02% higher than in years when the service sector is relatively strong, corresponding to an average additional resource consumption of USD 1.09 trillion per year. The average global GDP from 2011 to 2023 is approximately USD 76.47 trillion, which is about 1.43% of GDP. This means that even without considering economic growth, the structural changes brought about by the shift in global economic driving logic will also lead to an increase in metal demand; in fact, the global economy can achieve certain growth every year, corresponding to a broader increase in metal demand, which is also an important change that may occur in the future global economic driving logic.

In the medium-term dimension, the transfer and reconstruction of global capacity may lead to an increase in physical consumption per unit GDP from both the production and demand sides. From historical experience, countries that receive more investment have seen a significant positive expansion in per capita income, and there is an inverted U-shaped relationship between per capita income and the final physical consumption per unit. The underlying logic is that when people's living standards are low, they can only meet basic survival needs; as per capita income increases, people begin to have the ability to consume manufactured products, such as cars and home appliances, which often contain more physical consumption As per capita income levels continue to rise, people may shift their excess income towards service-oriented consumption, leading to a decline in the final consumption of physical goods per unit. Currently, the per capita final consumption of physical goods in major emerging countries remains at a low level. Therefore, against the backdrop of a global interest rate cut cycle that has begun, the transfer of global industrial chains and the construction of capacity in emerging markets may enter an accelerated phase, which will not only directly bring about investment demand but also generate more consumption demand through the increase in per capita income, forming a "investment-consumption" resonance expansion. It is expected that in the next 1-2 years, the recovery of the global manufacturing cycle is likely to become an important supporting force for the demand for resource products.

Metal Team: If AI construction is seen as a "structural inflation source," can raw materials represented by copper, aluminum, and nickel enjoy valuation premiums?

Strategy Team: When we discuss structural inflation, we are actually talking about which sectors are outperforming the average inflation level. Taking liquor as an example, from 2016 to 2020, its wholesale price outperformed the CPI. We know that when real estate prices continue to rise, the wealth effect for residents grows; the rapid appreciation of social collateral leads to corresponding financing demand and economic activity expansion, requiring liquor as a medium; liquor consumption demand and prices rise together; and distributors begin to restock based on the expectation of continuous price increases, ultimately forming a positive cycle of "price increase - stockpiling," with financial expansion supporting the high premium rate of this industry. Domestic black commodities have also benefited to some extent from this, as traders stockpile based on expectations of price increases; as long as downstream acceptance of prices is high enough, traders can achieve higher potential returns through stockpiling. The past decline in the central price of steel/real estate indicates that the price acceptance level for the entire black commodity sector during the real estate upcycle will rise, which will also create a phase of structural inflation elasticity. However, in the past two years, as financial capital enters a contraction cycle and manufacturing generally faces profit pressure, price increases have instead led to a more rapid shrinkage of demand, naturally resulting in a decline in enterprises' willingness to procure. Therefore, on the surface, the dynamic changes in prices are the result of supply and demand balance, but there is actually another underlying logic: once financial capital contracts, the demand for financial attributes is significantly weakened, and the structural inflation brought about by financial expansion will naturally disappear.

If we apply this logic to AI construction, in the past, the computing power-related fields of AI have gained favor from global financial capital, reflected in the effective increase in sales and profit margins of related companies. There are several possibilities for the future: once financial capital represented by U.S. stocks begins to contract, for whatever reason, lacking the support of financial expansion, structural inflation may be out of the question. Additionally, if AI construction can bring about structural inflation, whether raw materials represented by copper, aluminum, and nickel can enjoy valuation premiums mainly depends on the segment of the industrial chain they are in Historical experience shows that the value of the industrial chain often flows to the scarce links rather than the most value-creating links. A typical example is the development of the new energy industry after 2023, where photovoltaic technology, which promotes efficiency improvements, has not received significant premiums; instead, the scarce links represented by coal and thermal power have gained higher premiums. Therefore, only when raw materials represented by copper, aluminum, and nickel become the scarce links in the AI industrial chain can they hope to enjoy higher valuation premiums. Our attitude towards this still needs to be observed. However, currently, the shortcomings in the construction of computing power infrastructure in the United States are increasingly expanding into the power and infrastructure sectors, which will inherently rely more on commodity demand.

The following four questions are the responses from the metals team to the questions raised by the strategy team:

Strategy Team: How do you view the market for non-ferrous metals this year, and what are the reasons from an industry perspective?

Metals Team: Since the beginning of this year, the overall market for non-ferrous metals has shown a pattern of "supply contraction, inventory recovery, and financial drive" resonating together.

From an industry perspective, this round of price increases has both cyclical and structural characteristics. The tight constraints on the supply side are the underlying logic of the market. Over the past decade, global resource capital expenditure has been significantly insufficient, especially for key varieties such as copper, tin, and rare earths, where the development cycle of new mines is long, grades are declining, and approvals are strict. Coupled with the rise of resource nationalism and stricter safety regulations, the elasticity of the supply side has significantly decreased. Meanwhile, inventory has long been at low levels, and the recovery of manufacturing, energy transition construction, and investments in power grids and data centers have led to a rebound in demand, amplifying the marginal demand improvement in a low-inventory environment.

Looking back, the initiation of the inventory replenishment market is closely related to the countermeasures implemented domestically under the tariff backdrop, with export control policies on small metals such as antimony and rare earths becoming key triggers. After the introduction of such control policies, the overseas market quickly exposed structural contradictions of low inventory and high dependence on domestic supply, leading to significant panic-driven proactive inventory replenishment behavior, which also constituted the core reason for the outstanding performance of the small metal sector in the first half of this year, especially after the implementation of the tariff policy.

During this round of inventory replenishment cycle, copper prices were also supported by the replenishment logic, specifically reflected in the inventory replenishment process initiated in the U.S. market due to the impact of the 232 tariff, which completed its market performance in the first half of this year. However, compared to copper, the small metal sector has shown more prominent performance due to its higher elasticity. As we enter the second half of the year, with market expectations for interest rate cuts shifting from repeated speculation to final confirmation, gold, as a typical financial asset, has seen a significant strengthening in its price trend; at the same time, copper prices have further improved based on the replenishment logic, compounded by disturbances from unexpected events on the supply side.

From a financial perspective, the expectation of interest rate cuts by the Federal Reserve has driven up precious metal prices, while the temporary weakening of the dollar and the improvement in global liquidity have jointly supported the performance of metal prices; the rise in risk aversion and allocation demand has further strengthened the capital's push towards the non-ferrous sector. Overall, the rise in non-ferrous metals this year is not purely driven by demand, but rather a systematic recovery market under the constraints of supply, inventory replenishment, and the accumulation of financial attributes. Looking ahead, supply contraction and cost support will continue to dominate the price center, while demand improvement and capital sentiment will determine the phase elasticity.

Strategy Team: How to Understand the Valuation Differences Between Overseas and Chinese Non-Ferrous Stocks?

Metal Team: When analyzing the valuation differences between overseas and Chinese non-ferrous metal sectors, it can be understood from the dimensions of valuation methods, accounting systems, and so on.

From the perspective of valuation systems, global mining generally adopts two mainstream valuation methods: one is the absolute valuation method, which calculates the overall value of the enterprise by discounting the free cash flow of each mine under the company’s control over its entire life cycle, adding net cash and equity investments while deducting headquarters expenses. This method has universal applicability in international mining merger pricing but requires high data completeness, making it difficult to model each enterprise, especially for those with numerous mines and limited disclosures. In contrast, the relative valuation method is more commonly used in the actual valuation applications in both Chinese and overseas markets. Currently, domestic investors generally prefer using the price-to-earnings ratio (PE), while overseas markets place more emphasis on enterprise value multiples (EV/EBITDA). In terms of the PE metric, the overall valuation of overseas non-ferrous stocks is significantly higher than that of China, but when using the EV/EBITDA metric, the gap is not obvious. The root of this differentiation lies in the differences in systems and accounting treatment methods between the two regions.

Specifically, the overseas mining system is based on privatization and market authorization, with mining rights fully owned by enterprises. Initial investments in geological exploration, physical measurement lines, and resource confirmation can be capitalized as intangible assets and gradually deducted from profits through depreciation or amortization in later stages. In China, however, mining rights are more often regarded as state-conferred usage rights, and enterprises must obtain mining rights through approval and have a usage period. Initial investments are often expensed rather than capitalized. This institutional difference leads to a generally higher level of expensing for domestic mining companies, making the net profit reflected in the income statement closer to cash profit; whereas overseas companies, due to higher capitalization levels, have profits significantly diluted by depreciation and amortization, thus presenting a higher PE valuation level In other words, Chinese mining companies have a higher degree of profit cash conversion and better profit quality than overseas counterparts, but the accounting profit metric is higher, leading to a lower apparent valuation.

Overall, the valuation repair logic of China's non-ferrous sector is supported by adjustments in the institutional and financing systems. The PE valuation is expected to converge towards international levels, while benefiting from improvements in operational management efficiency and cash flow quality. The increase in valuation is not at the expense of profitability but reflects the structural re-evaluation brought about by the systemic reform of Chinese mining companies and the globalization process.

Strategy Team: From an industry perspective, how do we forecast the trends of major varieties from the supply and demand angle? How do we view the performance of the stock sector? Which companies are particularly favored?

Metal Team: From the supply and demand pattern, the global non-ferrous metals sector is overall in a "tight supply, moderate demand" neutral to bullish state. Structural constraints on the supply side remain evident. The new copper production capacity is being released slowly, with the grades of major mines continuously declining, and the extended development cycle leading to limited production growth. At the same time, the construction of power infrastructure, new energy equipment, and AI data centers is bringing marginal demand growth, forming a solid foundation for the mid-term rise in copper prices. In terms of aluminum, China's electrolytic aluminum capacity is nearing the 45 million tons ceiling, coupled with energy consumption and carbon emission constraints, limiting new capacity overseas. The demand side benefits from investments in power grids, lightweighting, and energy structure adjustments, keeping aluminum prices on an upward trajectory.

The rare earth sector is influenced by national strategic regulation, with stricter quotas and smelting controls on the supply side, leading to a continuous increase in industry concentration. The demand for rare earth magnetic materials is steadily expanding due to downstream high-end equipment, new energy drives, and intelligent manufacturing. Minor metals like tin and cobalt experience significant price fluctuations due to concentrated supply sources and high geopolitical risks, but they have a high long-term safety margin under policy and supply disturbances. In contrast, lithium and nickel are constrained by upstream expansion and fluctuations in downstream new energy rhythms, remaining in a destocking cycle in the short term.

On the stock side, the transmission sequence of this round of market is "commodity price increase → profit realization → valuation repair." In the short term, the profit recovery speed of sub-sectors such as copper, aluminum, and rare earths is relatively fast, with improvements in funding and dividend policies driving further valuation increases. In the medium term, the resonance of supply contraction and AI construction will support the sustainability of sector profits, with leading companies related to copper and aluminum expected to benefit from increased dividends and improved cash flow On the company side, copper enterprises have leveraged their early overseas advantages and acquired quality assets through mergers and acquisitions, realizing profits ahead of others; companies in the electrolytic aluminum sector with cost advantages and clear dividend policies are worth paying attention to; in the rare earth and minor metals sector, companies with upstream resource control and deep processing capabilities have long-term competitiveness. Overall, it is judged that the performance of the sector will be primarily driven by mid-term profit improvement, with dividend realization and cash flow quality becoming the core logic for valuation reassessment.

Strategy Team: What metal categories are mainly involved in the AI construction logic that has emerged this year in the non-ferrous metals sector? How does AI impact the demand for metals?

Metal Team: Since the beginning of this year, the rapid advancement of artificial intelligence construction has become an important new driving force for non-ferrous metal demand. The current construction of AI infrastructure mainly involves data centers, power systems, and cooling systems, with copper being the most significantly benefited metal category, followed by tin and some aluminum used in cooling systems. Copper is widely used in the AI industry chain, covering multiple aspects such as power supply for data centers, cables, transformers, and cooling equipment, making it the most core base metal in AI infrastructure. Tin is mainly used in PCB solder and electronic interconnection materials; although its absolute usage is relatively small, its high unit value means that related processing segments will benefit significantly.

According to the Berkeley Lab's "2024 U.S. Data Center Energy Usage Report," global data center electricity consumption is expected to be in the range of 325–580 TWh by 2028, corresponding to a power demand of about 150 GW. Considering the significant upward revision of GPU shipments and per-rack energy consumption, the growth in power demand will directly drive the expansion of the power grid and investment in power infrastructure, thereby boosting copper consumption. Therefore, using a high boundary as a calculation basis is more reasonable. Based on an electricity consumption level of 580 TWh, AI construction is expected to drive approximately 1.42 million tons of new copper demand over the next five years, contributing an average of 240,000 tons annually. Overall, the continuous expansion of AI infrastructure will become one of the core driving forces for the growth of non-ferrous metals, especially copper demand, in the next decade.

Author of this article: Guojin Securities Strategy and Metal Team, Source: Yiling Strategy Research (I D:gh_756861d1544f), Original Title: "Guojin Strategy Talk: Mutual Inquiry on Non-ferrous Metals"

Risk Warning and Disclaimer

The market carries risks, and investments should be made with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk