Broker: UOB Kay Hian
Date of Report: 11 June 2025

Copper Market Outlook 2025-2026: Trade Tensions, China’s Rising Dominance, and Top Stock Picks

Sector Overview: Navigating Trade Uncertainties and the Decarbonisation Megatrend

Copper prices have staged a notable recovery in 2025, fueled by renewed optimism in US-China trade negotiations. Despite this rebound, demand remains under pressure from persistent macroeconomic headwinds. Looser supply conditions have weighed on the Yangshan premium and triggered increased export activity. The short-term outlook for copper remains neutral, with upcoming trade negotiations poised as a key swing factor. Looking ahead to the first half of 2026, the sector’s long-term bull case is anchored in global decarbonisation efforts and policy-driven recoveries, especially in green energy and electrification.

Key Market Trends and Developments

• Copper Price Rally Amid Trade Hopes: London Metal Exchange (LME) 3-month copper prices rose 3.8% week-over-week to US\$9,793 per metric ton, buoyed by reports of a temporary US-China tariff truce and partial rollback. Net long positions in copper futures climbed to a seven-week high, reflecting improved speculative sentiment. Year-to-date, copper is up 11.7% and remains broadly flat year-on-year.
• China’s Shift Toward Self-Sufficiency: China’s copper import data highlights a structural move to upstream self-reliance. Copper concentrate imports in May 2025 dropped 18.1% month-over-month to 2.395 million tonnes, though year-to-date volumes reached a record 12.406 million tonnes (up 7.4% year-on-year). This supports an anticipated 10% increase in China’s national smelting capacity for 2025, with most new facilities coming online in the second half of the year.
• Refined Copper Output Soars: China’s dominance in refined copper production is tightening, now accounting for over 50% of global output. In May 2025, copper cathode production surged 12.86% year-on-year, and year-to-date output rose 11.09%. In contrast, smelters outside China—especially smaller or standalone operations—are struggling amid persistently low treatment and refining charges, accelerating global industry consolidation.
• Smelters’ Margins Squeezed, By-Products Offer Relief: Domestic smelting expansion and tight concentrate supply have driven treatment and refining charges negative, favoring miners while squeezing smelters. However, surging sulfuric acid prices—thanks to Southeast Asia’s new energy sector and China’s relaxed fertilizer export policy—are offsetting up to US\$43 per metric ton in smelting costs, supporting high operating rates.

Domestic Demand and Downstream Challenges

• Macro and Seasonal Weakness: Domestic demand is softening amid macroeconomic drag and the typical summer lull. China’s May 2025 manufacturing PMI slipped to 49.5, while the Caixin index fell to a 26-month low of 48.3—its first decline since October 2024. Export orders dropped to their lowest since July 2023, and May’s export growth missed expectations at just 4.8% year-on-year.
• Downstream Market Under Pressure: Operating rates for copper pipe and tube manufacturers declined in May 2025, with pipe and tube at 81.76% (down 1.96 percentage points month-over-month) and billet producers at 50.61% (down 4.36 percentage points). High inventories, weak orders, and off-season effects are prompting just-in-time procurement and slower turnover.
• Yangshan Premium Plummets: The Yangshan copper premium fell 50% week-over-week to US\$43 per metric ton, reflecting weak import appetite due to rising inventories and compressed SHFE/LME price ratios. Negative import margins (around –RMB 1,500/mt) are discouraging inbound shipments and cooling spot demand.
• Emerging Export Potential: As LME inventories tighten and the LME cash–3M spread widens to a bullish backwardation of US\$95.78/mt, Chinese smelters are preparing spot exports to capitalize on stronger offshore pricing. This shift could disrupt global trade flows and highlight China’s expanding influence over global copper markets.

Sector Outlook: Overweight Maintained, Near-Term Risks vs. Long-Term Bull Case

Copper faces a challenging near-term trajectory due to geopolitical uncertainty, policy divergence, and fragile global growth. Shifting trade patterns and volatile capital flows may distort short-term price signals and complicate supply chain decisions. While speculative positioning has turned more favorable, sustained gains will require clearer evidence of macroeconomic stabilization and demand recovery.
Looking beyond 2025, a more bullish perspective emerges:

• Active easing by Chinese and global central banks to support cyclical recovery
• Resilient demand from copper-intensive sectors: China’s grid investments, renewable energy projects, and robust electric vehicle (EV) demand
• Thin global inventory buffers, with potential for rapid tightening should project delays or disruptions accelerate

Top Stock Picks: In-Depth Company Analysis

Zijin Mining: Diversification, Capacity Growth, and Shareholder Value

• Rating: BUY; Target Price: HK\$24.00 (14x 2025F PE, +1 SD)
• Key Strengths: Zijin Mining boasts significant new capacity, underpinning clear earnings growth visibility and positioning the company to benefit from the current metal price rally.
• Diversification: A more balanced profit mix between gold and copper enhances the company’s earnings resilience, solidifying its status as a diversified mining leader.
• Strategic Initiatives: Zijin is planning a spin-off of its overseas gold assets in the second half of 2025 to capitalize on high gold prices. This move is expected to unlock substantial shareholder value, optimize its portfolio, and broaden access to international investors. Additionally, employee share options are planned to better align employee and shareholder interests.
• Outlook: While near-term copper prices face pressure from trade-related uncertainties, Zijin’s long-term prospects remain favorable, supported by constrained supply and accelerating demand from the global energy transition.

CMOC: Growth, Cost Optimization, and ESG Leadership

• Rating: BUY; Target Price: HK\$8.70 (12x 2025F PE, mean valuation)
• Operational Excellence: CMOC is recognized for strong operational execution, a robust growth outlook, and a solid ESG track record.
• Cost Leadership: The company’s ongoing focus on optimizing production costs should support margin expansion. Ample liquidity provides resilience amid market volatility.
• Growth Drivers: Exposure to both copper and cobalt positions CMOC to benefit from rising metal prices and long-term demand linked to global electrification.
• Volume and Earnings Upside: Production ramp-ups at Kisanfu and Tenke Fungurume Mine continue to support volume and earnings growth into 2025 and beyond.

Conclusion: Strategic Positioning for Long-Term Gains

The metals and mining sector, particularly copper, faces near-term hurdles from macroeconomic and geopolitical uncertainties, as well as shifting trade and inventory dynamics. However, the long-term outlook is bullish, bolstered by structural demand from decarbonisation, electrification, and infrastructure investment.
UOB Kay Hian maintains an OVERWEIGHT stance on the sector, recommending Zijin Mining and CMOC as top picks for investors seeking diversified exposure, robust growth prospects, and resilience in a dynamic market.

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