The nonferrous metals sector has recorded its third consecutive day of strong gains today (July 23). At the time of writing, the sector has seen nearly 10 billion yuan in net inflows from main funds. The largest and most liquid ETF tracking the sector's underlying index, ChinaAMC CSI Nonferrous Metals ETF (159876), saw its intraday gain reach as high as 4.61% in early trading. It is currently up 2.74%, having reclaimed its 20-day moving average during the session.

The sector's combination of strong fundamentals and low valuations is highlighting its value for right-side allocation, attracting active capital deployment. As of this writing, the ChinaAMC CSI Nonferrous Metals ETF (159876) has seen a real-time net subscription of 5.4 million units.

Key Stock Performers

Among the index constituents, Nanshan Aluminium, Chengxin Lithium Group Co.,Ltd. (SZSE: 002240), and Guocheng Mining hit the daily limit-up. Tianshan Aluminium and Huafon Aluminium also posted significant gains. The energy metals segment was particularly strong, with the "lithium giants" leading the charge: Ganfeng Lithium surged over 6% and Tianqi Lithium rose more than 5%.

Robust Earnings for Lithium Leaders

Fundamentally, the "lithium giants" have reported impressive earnings. Ganfeng Lithium expects its first-half net profit attributable to shareholders to be between 3.65 billion and 4.6 billion yuan, representing a year-on-year increase of 787.07% to 965.9%. Tianqi Lithium forecasts its first-half net profit to be between 2.85 billion and 4.25 billion yuan, a staggering increase of 3276.35% to 4934.91% compared to the same period last year.

Sector Outlook from Analysts

Goldman Sachs believes the lithium industry may be entering a new upcycle. They project a significant tightening of the lithium market by the fourth quarter of 2026, potentially heralding a new period of prosperity. China Securities (CSC) notes that on the supply side, lithium carbonate production is declining, with some lithium salt plants undergoing planned maintenance, leading to a noticeable reduction in spodumene production lines. On the demand side, July production schedules are expected to continue growing, with material plant operating rates remaining high, projected to increase over 5% month-on-month. August schedules are also expected to show positive month-on-month growth, suggesting a strong off-season and promising prospects for the peak fourth quarter.

Strong Index Constituent Earnings

Data shows that as of July 22, among the 60 constituents of the underlying index tracked by the ChinaAMC CSI Nonferrous Metals ETF (159876), all 39 companies that have announced their 2026 interim earnings forecasts are expecting both profitability and growth. Zijin Mining is projected to lead with a maximum estimated net profit of 39.1 billion yuan, followed by China Molybdenum and Aluminum Corporation of China with estimated maximum net profits of 16.5 billion and 12.2 billion yuan, respectively.

Macroeconomic Backdrop

Following the lower-than-expected US June CPI and PPI inflation data, market expectations for further Federal Reserve rate hikes have cooled sharply. According to the CME FedWatch Tool, keeping rates unchanged at next week's (July 28-29) FOMC meeting has become the market's baseline expectation. CITIC Securities points out that looking ahead to Q3 2026, whether the Fed initiates rate cuts is a key variable affecting the commodity market, particularly impacting prices of precious metals and crude oil. They are generally optimistic about commodities with strong demand-side support, such as copper, lithium carbonate, and electrolytic aluminum.

Fund Manager Perspective

The Index Research and Investment Department of ChinaAMC states that the nonferrous metals sector's strong fundamentals and low valuations warrant attention for its right-side allocation value. The sector had previously been oversold due to dual pressures from high oil prices triggered by US-Iran tensions and a correction in the tech sector. Overall, the factors that led to the sector's correction since March may have largely dissipated. Current stable commodity prices are supporting corporate profits, and leading companies still have volume growth contributing, giving the sector high earnings certainty. The combination of low valuations and high growth certainty presents a quality window for allocating to the nonferrous metals sector.

Diversified Exposure Through ETFs

Given that different non-ferrous metals have varying levels of prosperity, cycles, and drivers, divergence is inevitable. A simpler approach for those bullish on the sector is to capture the broader beta through diversified exposure. The ChinaAMC CSI Nonferrous Metals ETF (159876) and its feeder funds (Class A: 017140, Class C: 017141) track an index that comprehensively covers industries including copper, aluminum, rare earths, gold, lithium, tungsten, molybdenum, and tin. This full-category coverage can better capture the sector's beta. Furthermore, this ETF is a margin trading and securities lending target, making it an efficient tool for a one-stop investment in the nonferrous metals sector.

As of June 30, 2026, the ChinaAMC CSI Nonferrous Metals ETF (159876) had a latest size of 1.345 billion yuan and a six-month average daily trading volume of 107 million yuan. Among the three ETFs tracking the CSI Nonferrous Metals Index in the market, it is the largest and most liquid.