Oriental Securities released a research report stating that China is considering including copper concentrate in the national strategic reserve system to address the high import dependency of 75% and strengthen supply chain security. Declining global copper ore grades and insufficient capital expenditure are exacerbating supply tightness, while demand from sectors like new energy continues to grow, supporting a medium-term upward trend in copper prices. China's strict control over new copper smelting capacity, along with "anti-internal competition" policies, is expected to drive simultaneous increases in copper prices and smelting fees, benefiting the profit recovery of related enterprises. The main views of Oriental Securities are as follows: Copper concentrate may be included in the strategic reserve scope, potentially further enhancing supply chain security assurance. At a press conference on the 2025 non-ferrous metals industry economic performance, an association official stated that improving the copper resource reserve system involves both expanding the scale of national strategic copper reserves and exploring the establishment of a commercial reserve mechanism. In addition to storing refined copper, studying the inclusion of copper concentrate, which has large trade volume and is easily liquidated, into the reserve scope is also under consideration. China is the world's largest producer and consumer of refined copper, yet its copper supply chain remains relatively fragile. According to customs statistics, by the end of 2025, China's imports of copper ore and concentrate increased by 7.9% year-on-year, with domestic import dependency for copper concentrate reaching 75%. This exploration of including upstream raw material copper concentrate into the national strategic reserve system, beyond just refined copper, signifies a shift in China's approach to copper supply chain security from a single-product reserve to a multi-level, multi-variety reserve system, which is expected to further enhance supply chain security assurance.
Against the backdrop of declining global copper ore grades, the trend of supply tightness may persist, elevating the status of copper as a critical metal. The average grade of global copper mines is currently in a declining phase. Several major copper producers have disclosed that their 2025 copper output decreased compared to 2024 due to lower ore grades. Coupled with insufficient capital expenditure by mining companies in recent years and a declining trend in the pace and scale of discoveries of major copper resources, it is anticipated that the medium-term supply side of copper ore will struggle to see significant increases. Meanwhile, with sustained demand growth from downstream traditional sectors such as global power grid upgrades and emerging areas like the new energy transition, copper is likely to remain in a supply-constrained trend in the medium term. This highlights the critical role of copper resources in the manufacturing development processes of various countries. For instance, the United States has already classified copper as a critical mineral resource and plans to initiate a strategic critical mineral reserve program with an initial funding of $12 billion to help reduce foreign dependency on critical metals. The report believes that, under the logic of tightening supply, the status of copper as a key mineral resource for manufacturing development is expected to continue to rise, and prices still possess medium-term upward momentum.
The "anti-internal competition" policy for copper smelting remains unchanged, maintaining a positive outlook on the medium-term trend of simultaneous increases in copper prices and smelting fees. In addition to improving the copper resource reserve system, officials at the press conference stated that over 2 million tons of copper smelting projects have been suspended, and future efforts will continue to strictly control new mining copper smelting projects in coordination with relevant national departments. Another official also mentioned that current "anti-internal competition" policies for copper are being rolled out, with effects expected to gradually materialize over the next two to three years. The report believes that, under the expectation of strict control over new domestic copper smelting capacity and the effective implementation of "anti-internal competition" policies, copper smelting fees are anticipated to experience an upward correction in the medium term. Oriental Securities continues to be optimistic about the medium-term simultaneous rise in copper prices and smelting fees, and recommends focusing on the profit recovery potential and investment opportunities for both copper mining enterprises and copper smelting enterprises.
Investment recommendations: For the copper mining segment: it is advised to focus on Zijin Mining Group, which has large resource reserves and expectations for sustained medium-term copper mine production expansion. Other targets include: China Molybdenum Co., Ltd. and JCHX Mining Management Co., Ltd. For the copper smelting segment: it is advised to focus on Tongling Nonferrous Metals Group Co., Ltd., which benefits from increased output from the Mirador copper mine boosting its copper concentrate self-sufficiency rate and is expected to see greater profit elasticity from improvements in spot smelting fees. Other targets include: Jiangxi Copper Company Limited. Risk warnings: Risks of significant fluctuations in global copper ore supply; risks of copper downstream demand falling short of expectations due to macroeconomic fluctuations; risks of the "anti-internal competition" policy for copper smelting being implemented less effectively than anticipated.