UBS issued a research report stating that the fundamentals of China's copper and aluminum metal industry remain stable with positive prospects. Meanwhile, UBS has raised earnings expectations and target prices for related concept stocks. Specifically, UBS reiterated a "buy" rating for CHINAHONGQIAO (01378) and increased the target price from HK$26.8 to HK$28.
UBS noted that despite concerns about a "weak period" in metal demand due to normalization of pre-tariff buying behavior and market distortions (particularly in copper), this situation did not materialize as feared in the third quarter. Industrial metal prices have been supported by positive macroeconomic factors (rather than physical market supply tightness), including: US interest rate cuts and USD weakening, confidence in aluminum trade, China's "counter-cyclical" policies, and potential additional Chinese stimulus measures.
The improved macroeconomic backdrop (combined with stable fundamentals and increased M&A activity) has supported capital flows toward miners. UBS believes the overall outlook for industrial metals is improving, with reduced risks of near-term demand slowdown. Medium-term copper/aluminum fundamentals remain attractive, and the energy transition (supported by AI/defense) will continue to underpin demand-supply dynamics, though this may face challenges. In developed markets, restocking potential may provide support when traditional end markets (automotive/construction/manufacturing) recover.
Copper Outlook: Both Fundamentals and Macro Factors Show Positive Trends
Spot market fundamentals remain stable, with prices supported by macroeconomic factors, despite reduced trade in Q3 due to US tariffs. UBS expects fundamentals to remain supportive in 2026/2027, driven by: 1) limited mine supply growth; 2) pressure on refined production; 3) strong long-term growth drivers (electrification, technology, etc.); and 4) recovery in traditional demand drivers, leading to price increases.
UBS's global metals and mining team has raised 2025/2026 copper price forecasts from $4.24/$4.68 per pound to $4.37/$4.80 per pound ($9,634/$10,582 per ton).
Aluminum Outlook: Supply Constraints Continue to Support Prices
Aluminum demand performance has been mixed, but supply remains constrained, with Chinese production limited and minimal supply growth elsewhere. UBS's global metals and mining team has raised 2025/2026 aluminum price forecasts from $1.11/$1.16 per pound to $1.17/$1.18 per pound ($2,579/$2,600 per ton).
Consequently, after considering higher copper, aluminum, and gold price forecasts, UBS has raised earnings expectations and target prices for related concept stocks. The firm increased CHINAHONGQIAO's 2026 earnings expectations by 5% while raising the target price by 4% to HK$28.