CITIC Securities: Seizing the opportunity to repair valuations in the copper industry amid expectations of price increases and sentiment recovery

The Zhitong Finance App learned that CITIC Securities released a research report saying that multiple benefits will push copper prices to hit 14,000 US dollars again. Core drivers such as lower inventories and supply disturbances will continue, and most potential tariff paths will still benefit copper. Under neutral assumptions, copper prices are expected to hit 15,000 US dollars within the next year. The focus is on recommending investment opportunities in the copper sector that benefit from the resonance of valuation flexibility and profit elasticity.

CITIC Securities's main views are as follows:

Multiple realistic advantages pushed the copper price to hit 14,000 US dollars/ton once again.

As of July 21, 2026, the LME copper price rebounded again and was close to 14,000 US dollars/ton, with a cumulative rebound of 7% from the bottom of 13,000 US dollars/ton in late June 2026. Under the traditional low season of domestic demand (SMM predicts that domestic consumption growth will drop from 4.4% in January-June to 1.0% in July) and market interest rate hikes are high (currently CME FedWatch is still the basic price of the Federal Reserve's interest rate hike of 25 bps), copper prices bucked the trend. The core factors are: 1) rising expectations of tight spot prices due to low domestic inventories; 2) extreme weather disturbances in the supply of copper ore; 3) the expected game of US refined copper import tariffs. There is a high degree of certainty that the first two factors mentioned above will continue to strengthen in the next quarter, while the third one, despite differences, is likely to eventually evolve into a neutral or positive scenario (see below for details on the analysis of the three factors). According to this, the copper price center is likely to continue to move upward. Under the neutral assumption, the LME copper price is expected to impact 15,000 US dollars/ton during the year.

The mismatch between supply and demand is expected to reinforce the low inventory effect and solidify the trading foundation for rising copper prices.

According to SMM, as of July 20, 2026, domestic copper stocks were 144,000 tons, with a cumulative total of more than 500,000 tons removed from the high in early March (including more than 100,000 tons since July). The current inventory level is the lowest level in the same period since 2021, along with an increase in domestic spot prices in the past week. According to SMM, the apparent domestic consumption of refined copper increased by 4.4% in January-June, but the actual supply (domestic production+net import volume) growth rate was only 2.8%, and the mismatch between supply and demand was reflected in inventory removal that exceeded expectations. According to SMM forecasts, under the off-season effect, domestic refined copper consumption will drop 0.6% in July-August, but actual supply will drop by 3.5% due to smelting and maintenance, tight raw materials, and insufficient imports. The mismatch between supply and demand has intensified or led to a further decline in domestic inventories, providing stronger spot support for copper prices and more flexible trading opportunities under potential benefits.

Extreme weather and potential downgrades in production guidelines may heighten supply concerns.

According to SMM, in Chile, the world's largest copper producer, bad weather has affected some large-scale copper mines, and port ship navigation has also been restricted. Many mining companies, including Codelco, Antofagasta, and Anglo-American Resources, have initiated safety emergency plans and made adjustments to some operations. Periods of high deviation in the El Niño index in history (the El Niño phenomenon when it is high) are usually accompanied by a decline in Chilean copper production. According to NOAA (US National Oceanic and Atmospheric Administration) predictions, the probability of an El Niño event occurring in 2026H2 is close to 100%, with an average probability of a strong El Niño event occurring in September-November reaching 25%. Furthermore, according to 2026Q1 data from earlier statistics, the 2026Q1 production of many of the world's leading copper mining companies completed less than 23% of the latest annual guidelines, and the production completion rate of Codelco and Freeport was 3-5 ppts lower than the average for the same period of 2023-2025, reflecting a high probability that subsequent copper production guidelines will be revised down. Recently, we have entered a period of intensive disclosure of 2026Q2 data from global copper mining companies, and potential revisions to guidelines may heighten supply concerns.

Waiting for the US copper tariff decision, most paths are still favorable to copper.

According to Bloomberg, the US Department of Commerce submitted a copper market assessment report to US President Trump before the end of June. Currently, decisions related to import tariffs on refined copper are awaiting implementation. The explicit demand for “transactional” inventory accumulation (COMEX accumulation) helps to intensify the copper sector market, while the demand for “ready stock” inventory hoarding (hidden inventory accumulation) provides solid support for copper fundamentals. Based on the above conclusion, most of the market's anticipated tariff paths will still be beneficial to copper:

1) If the plan with the highest previous market expectations is finally implemented (phased tariff levy starting in 2027), 2026H2 (considering the transportation cycle, especially 2026Q3) will become the right-hand window for overseas inventory accumulation, which in turn will form high-intensity and high-speed inventory accumulation requirements in terms of both “transactional” and “stocking”, which will benefit the upward elasticity of copper in terms of transactions and fundamentals;

2) Referring to the situation at the end of July 2025, if the implementation of this tariff decision is delayed again, the demand for short-term inventory accumulation will be weakened, but the time window will be extended. Subsequent “transactional” demand will be repeatedly amplified at critical time points, and “stocking” demand will be smoother but more sustainable, which is beneficial to the steady rise in copper prices in the medium term;

3) If a plan with low market expectations is implemented, tariffs will reduce future inventory accumulation levels, but the probability of returning existing inventory is low, and if the tariffs are completely abolished, there will be a certain risk of inventory return (concentrated on the COMEX part).

The copper sector's valuation repair may still be in its infancy. The focus is on recommending copper sector allocation opportunities.

Although the PE valuation of the domestic copper sector has recently recovered moderately from a sentiment freezing point of 9-10 times, by the close of trading on July 22, 2026, it is expected that the sector's predicted PE in 2026 (based on copper price assumptions of 13,000 and 14,000 US dollars/ton, respectively) will only be 10.9 times and 10.2 times, respectively, and is still at an all-time low. According to the review, there is a strong positive correlation between the PE valuation level in the domestic copper sector and the expected increase in copper prices in the next 1-2 quarters, but to reach the valuation freezing point (10 times or even lower), a double combination of “lack of expectations for price increases” and “pessimistic market sentiment” is required. Judging that both of these aspects are currently undergoing positive marginal shifts, there is still plenty of room for repair in the copper sector's valuation level, and the improvement in price expectations (that is, an increase in profit expectations) will further expand the room for stock prices to rise.

Risk factors:

The risk of a sharp drop in copper prices; the point, method, or magnitude of the US copper tariffs falling short of expectations; downstream demand falling short of expectations; the risk of falling short of expectations or a sharp rise in costs due to continued price increases for sulfuric acid, diesel, etc.; the risk of liquidity shocks caused by the escalation of the US-Iran conflict; supply risks caused by extreme weather; and the risk of Chinese companies' overseas copper operations.