Citigroup has released a research report indicating that commodity prices have risen significantly and appear to be consolidating at higher levels. The bank analyzed the impact of this trend on various sectors in mainland China.

Positively, the basic materials industry is a primary beneficiary, particularly aluminum, copper, and lithium suppliers. The bank has assigned a "Buy" rating to CHALCO (02600), CHINAHONGQIAO (01378), and ZIJIN MINING (02899). It is also optimistic about pure copper producers such as MMG (01208), Jiangxi Copper (00358), and China Molybdenum. Furthermore, gold jewelry retailers are expected to benefit from rising gold prices, while increases in copper prices are likely to expand the gross profit margins of copper clad laminate (CCL) manufacturers.

Negatively, automobile manufacturers are expected to face pressure from rising bill of materials costs. The bank forecasts that the per-vehicle costs for mass-market Battery Electric Vehicles (BEV) and Plug-in Hybrid Electric Vehicles (PHEV) will increase by approximately 6,565 yuan and 4,310 yuan, respectively. Within the industry, XPeng and GAC Group are more vulnerable due to their smaller scale and lower average selling prices. In contrast, BYD and Geely Auto, with their larger scale, have the capacity to pass over 50% of the cost increases upstream to their suppliers.

Additionally, the bank anticipates that secondary companies in the battery sector will encounter short-term pressure. However, CATL possesses stronger bargaining power, and its Jiangxi lepidolite mine is expected to resume production in the second quarter of this year, making it more defensive compared to its peers. The report suggests that energy storage system sales will face margin compression, particularly in the second quarter, prompting the bank to initiate a 90-day negative catalyst watch on the sector. In the solar industry, module manufacturers are more susceptible to rising silver costs, which account for about 30% of their production costs, potentially squeezing their profit margins. Among China's power grid equipment manufacturers, Pinggao Electric is the most sensitive to increases in copper and aluminum costs.