China Galaxy Securities has released a research report stating that global copper mine production continues to face disruptions, with output at major global copper mining companies declining on both a year-over-year and quarter-over-quarter basis in the third quarter. The tightening supply of copper concentrate has driven smelting processing fees to keep falling, prompting domestic copper smelters to increase maintenance and production halts after October. China's refined copper output may decline further in the fourth quarter of 2026, and the accelerating transmission of concentrate shortages to the smelting segment is expected to provide support for copper prices. After the U.S. midterm elections in which Democrats regained control of both chambers of Congress, Democratic leaders in the House and Senate explicitly stated their intention to push for an end to the war with Iran. Once the U.S. war with Iran ends and the Strait of Hormuz reopens to shipping, oil prices and U.S. inflation expectations may decline. Combined with market concerns over the unsustainability of AI investment returns and debt, as well as growth worries triggered by Democratic policies that delay AI construction, the Federal Reserve's rate hike expectations may weaken, which could drive a rebound in gold prices. The main views of China Galaxy Securities are as follows:
Industry Sentiment Declines as A-Share Nonferrous Metals Sector Earnings Growth Eases in Q3 2026
The escalation of the U.S.-Iran conflict and the blockade of the Strait of Hormuz, which pushed oil prices higher, continued to negatively impact the nonferrous metals industry in the third quarter. The inflation threat brought by the rapid rise in oil prices to elevated levels caused the Federal Reserve to shift its monetary policy and enter a rate hike cycle in the third quarter. The marginal tightening of market liquidity suppressed both the sentiment of the nonferrous metals industry and nonferrous metal commodity prices. Meanwhile, the rise in energy, transportation and other costs brought by higher oil prices also became apparent in the third quarter, further eroding industry profits and weakening the profitability of nonferrous metals companies. Combined with a higher base, this led to a noticeable decline in overall earnings growth for the A-share nonferrous metals sector in Q3 2026. Specifically, the A-share nonferrous metals industry's revenue for the first three quarters of 2026 grew 26.64% year over year, while earnings grew 85.98% year over year. In the single quarter of Q3 2026, the A-share nonferrous metals industry's revenue grew 17.75% year over year, while earnings grew 56.31% year over year.
Profitability Weakens as A-Share Nonferrous Metals Sector ROE Falls for the First Time Since 2024 in Q3 2026
The overall ROE of the A-share nonferrous metals industry fell from 5.00% in Q2 2026 to 4.14% in Q3 2026, down 0.86 percentage points quarter over quarter, marking the first decline since 2024. Among the components, the industry's overall net profit margin dropped from 8.27% to 7.33%, dragging ROE down by 0.53 percentage points, which was the most core factor behind the change in the industry's overall ROE level in Q3 2026. The decline in the A-share nonferrous metals industry's overall gross profit margin in Q3 2026 became the main reason for the drop in the industry's net profit margin in the third quarter of 2026. With the U.S.-Iran conflict continuing and the Strait of Hormuz blockaded, the inflation threat from higher oil prices forced the Federal Reserve to tighten monetary policy and shift to rate hikes in the third quarter. The marginal decline in market liquidity pushed nonferrous metal commodity prices lower in the third quarter. At the same time, higher oil prices in the third quarter were transmitted to rising energy costs, transportation costs and auxiliary material costs, raising the production and sales costs of nonferrous metal products and further squeezing the profitability of nonferrous metals companies and the industry's gross profit margin level.
A-Share Nonferrous Metals Sector Operating Cash Flow Continues to Improve in Q3 2026
The A-share nonferrous metals industry's overall net operating cash flow in Q3 2026 grew 35.12% year over year compared with Q3 2025, and increased 19.18% quarter over quarter compared with Q2 2026. The industry's overall operating cash flow in Q3 2026 rose quarter over quarter from Q2 2026 and achieved year-over-year growth for three consecutive quarters since Q4 2025, demonstrating a continued improvement in the cash position of A-share nonferrous metals companies.
Risk Warnings:
1) The risk that the pace of domestic macroeconomic recovery falls short of expectations; 2) the risk that the Federal Reserve tightens monetary policy and raises rates by more than expected; 3) the risk of a sharp decline in nonferrous metal commodity prices; 4) the risk that the Middle East geopolitical conflict continues to escalate and evolves beyond market expectations.