Galaxy Securities: Optimistic about the future price of copper, continuing to rise. The value of core copper mine targets is highlighted.

Galaxy Securities released a research report stating that the domestic promotion of the construction of a copper resource reserve system aims to enhance the resilience and security level of the domestic copper supply chain. In the context of the global hundred-year changes, major power competition for the control of key mineral resources for their own resource supply security and the construction of independent supply chain systems will lead to an expansion of the global copper deficit, and copper prices will rise due to a "security premium". In the short term, copper prices are influenced by the mistaken impact of the expectations of the Federal Reserve policy, and they have a certain restorative power. The recovery of downstream demand solidifies the fundamental support. Some of the core A-share copper mine targets are valued at a high safety margin in 2026, and the allocation value is highlighted. Optimistic about the future rise in copper prices. Event: On February 3, the China Nonferrous Metals Industry Association stated that the improvement of the copper resource reserve system construction will expand the national strategic copper reserve scale on the one hand, and explore the establishment of a commercial reserve mechanism on the other hand. By subsidizing financial means, national backbone enterprises will try commercial reserves. In addition to storing refined copper, it is also possible to consider including large trading and easily liquidated copper concentrates in the reserve range. The strategic nature of storing copper at high prices demonstrates the security of the supply chain: in history, national reserves have mainly intervened at low prices. Near July 2020, the pandemic caused economic stagnation, and copper prices fell to a five-year low of 33,200 yuan/ton. The national reserves received 300,000 tons of copper to support the market, absorb excess and stabilize expectations. The high-priced copper reserves at this time have surpassed the range of price suppression. This should echo the forward-looking strategic layout of the 19th Party Congress to "ensure the security of the important energy and resource industry supply chains" and the Third Plenary Session of the 20th Party Congress to "improve the coordination system of strategic mineral exploration, production, supply, storage, and sales". The aim is to enhance the resilience and security level of the domestic copper supply chain. The United States is also promoting the reserve of key mineral resources, with copper resources becoming a focus of competition: the United States is also constructing a system of secure reserves for key mineral resources and plans to launch an initial $12 billion plan to establish a controllable supply chain. Combined with its precedent of controlling Venezuela's oil, the American copper resources, which are the largest and third largest copper-producing countries in the world, are also target objectives under American "Monroe Doctrine". Although the recent market's attention to the expected imposition of copper tariffs by the United States has decreased, the narrowing of the COMEX-LME copper price differential has raised concerns about the outflow of American copper stocks counteracting copper prices. However, as copper is a key resource for the resurgence of American manufacturing, military construction, AI infrastructure, and grid rebuilding, it is highly likely to be solidified as strategic reserves and will not flow out. Major powers increasing reserves reshape supply-demand balance, lifting copper "security premium": in the context of a hundred years of global changes, major power competition focuses on resource security. Major powers increasing copper reserves will reshape the supply-demand balance of the copper industry, reduce market available supply, and intensify tension. In the short term, the shortage of copper mines is difficult to change, and it is expected that the copper mine deficit will further expand by 2026, with the global refined copper surplus shrinking to 170,000 tons. If China, like in 2020, buys 300,000 tons of reserves, coupled with a continuous inflow of American copper stocks, it is expected that by 2026, global refined copper will turn into a shortage, pushing up copper prices. Major power games for their own resource supply security to control key mineral resources, and the construction of independent supply chain systems, will lead to an expansion of the global copper deficit, and copper prices will rise due to a "security premium". Expectations of a hawkish stance by Powell are exaggerated, and copper prices are expected to recover and rebound: recently, copper prices fell sharply along with gold and silver, with one important factor being Trump's nomination of "hawkish" Kevin Warsh as the new Fed Chairman. However, the market may have exaggerated Warsh's hawkishness, believing that his hawkish balance sheet reduction mainly stems from concerns about the new QE policy of the Fed after 2008. Now the environment has changed, and Warsh is more likely to lean towards interest rate cuts by 2025. In addition, by 2026, the US banking industry's reserve is less than $3 trillion, and with Trump's call for fiscal expansion, the Treasury Department issuing debt at the Fed's request to stabilize the bond market, the feasibility of the Fed's balance sheet reduction is smaller. The market still expects two interest rate cuts by the Fed in 2026, and copper prices are expected to recover after the market mistakenly killed expectations of Warsh's "excessive hawkishness". Copper price correction activates downstream demand, orders increase significantly: this sharp drop in copper prices has significantly increased the downstream's acceptance of copper prices, with real industries speeding up procurement and improving transaction activity, stimulating demand. A survey of 31 domestic copper rod enterprises (including refined copper and recycled copper rods with an annual capacity of 6.01 million tons) and six traders by Mysteel on February 2nd showed that the daily copper rod orders were 43,000 tons, an increase of 29,000 tons from the previous trading day, a month-on-month increase of 198%. Among them, the order volume for refined copper rods was 42,000 tons (reaching a historic high level since the survey), an increase of 29,000 tons from the previous trading day, with a month-on-month increase of 229%. The price decline stimulates inventory replenishment and immediate procurement, making price transmission smoother, end-user acceptance stronger, and demand support gradually apparent, providing a fundamental basis for the subsequent stabilization and rise in copper prices.