CITIC Construction Investment: Copper is still a high-quality and scarce resource. Prices are stepping back and consolidating the foundation of equity investment

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that in 2025-2026, the global refined copper market had surplus of 290,000 tons and 260,000 tons respectively. As the US threatened to impose tariffs of up to 15% and 30% on refined copper, which drove goods to gather in the US, Comex copper inventories had a net increase of 370,000 tons and 350,000 tons respectively in two years. The US not only consumed the excess of refined copper over the past two years, but also absorbed inventory from non-US regions. This structural shortage has desensitized copper to interest rates and economic performance, leading to price deviations. The 2027-2028 balance points to a slight surplus in the copper market and a marginal decline in the hoarding effect brought about by US copper tariffs. Non-US regions are likely to take on this part of the surplus alone, which in turn will lead to a return to deviated prices. Since it is still difficult to expand the supply of copper ore on a large scale, consumption is driven by new sources such as data centers, energy storage, and electricity. Copper is still a high-quality scarce resource. Price reversal will reduce the split between copper stocks and copper prices, and consolidate the foundation for equity investment.

CITIC Construction Investment's main views are as follows:

Product attributes: In 2027-2028, there was a slight surplus of refined copper in the world, but the excess showed convergence and there was a gap in 2029

In 2027-2029, global refined copper production is expected to be 29.07 million tons, 29.89 million tons, and 30.47 million tons, respectively, with increases of 1.9%, 2.8%, and 1.9%, respectively. The increase mainly depends on the resumption of copper production and new releases. Smelting interference has become a new variable, but it does not constitute a bottleneck for medium- to long-term copper ore conversion into refined copper. On the consumer side, data centers, energy storage, and electricity will continue to release demand for copper. In 2027-2029, global refined copper demand is expected to be 2,892, 2974, and 30.49 million tons, respectively, up 2.3%, 2.8%, and 2.5% year-on-year. From the perspective of the balance between supply and demand, the 2027-2029 balance was +150,000 tons, +160,000 tons, and 30,000 tons, and the excess showed a convergence trend.

Financial attributes: Copper prices deviate from indicators such as inflation and economic growth. Anti-globalization inflation expectations are stable at a high level, and economic growth is resilient, reflecting limited space for copper prices to step back

Copper showed a positive correlation with inflation expectations, debt levels, economic expectations, and economic growth indicators over the long term. However, in 2025-2026, the US siphon non-US inventories strengthened commodity attributes, causing copper prices to deviate from these indicators reflecting finance and the economy for a period of time. As the US siphon weakens, the 2027 global copper surplus will be reflected in a recovery in non-US inventories, and excess can easily drive the return of deviated copper prices. It is worth noting that in the process of the global economy moving from a cooperative division of labor that prioritizes efficiency to a limited division of labor that prioritizes safety and geographical competition, inflation expectations, debt levels are difficult to loosen, the economy is divided and resilient, and the upward drive and space for US bond yields has also been limited. These all limit the depth of the return of copper prices.

The divergent return of copper prices did not change the nature of scarce copper resources. The equity side took the lead in taking the lead in accounting for the downward movement of copper prices, and copper prices stepped back to make up for the share market split, creating a layout opportunity

There was a divergence between copper stocks and copper prices in 2026. The average PE (TTM), which is the main target, has declined to its lowest level in the past 5 years, and the average PE average is expected to be only 7.68X in 2027. The continued divergence makes capital tend to wait for copper prices to return to confirm purchases. The return of copper prices is expected to be fulfilled in 2027. Copper is an indispensable power metal in new industrial revolutions such as AI infrastructure and energy. Data centers, energy storage, and power grids relay new energy vehicles and photovoltaics to release demand vitality. However, front-end exploration's acquisition of mining, intermediate approval, and force majeure during the production process all limit the growth rate of copper supply. The copper price return process will also stimulate dried up downstream inventories, thereby reducing the static excess balance and gap. Therefore, we particularly emphasize that copper is still a scarce high-quality resource with long-term investment value. Prices are still in a major upward cycle. When copper prices are squeezed out and returned to the original orbital range, active allocation is recommended.

risk analysis

1. The US copper-232 investigation was put on hold; 2. Copper ore supply fell far short of expectations, driving prices to shift sharply upward; 3. The war in the Middle East continued, and high oil prices triggered the risk of a global recession.