Investment Strategy Analysis of Non-Ferrous Metal Industry Chain: Structural Opportunities Amid Record-High Copper and Aluminum Prices

Upstream enterprises represented by Zijin Mining have demonstrated strong profitability. Data shows that Zijin Mining’s ROE reached as high as 30.60%, with a net profit margin of 13.91% and an operating margin of 20.11%, far exceeding those of midstream and downstream enterprises [0]. Its stock price has risen by 104.02% since 2025, with a market capitalization of 821.73 billion yuan, reflecting the market’s recognition of resource scarcity and pricing power [0].

Jiangxi Copper, as a representative of midstream smelting, faces obvious profitability pressure. Its net profit margin is only 1.54%, operating margin is 1.91%, and ROE is 10.02%, all significantly lower than upstream enterprises [0]. Although the rise in copper prices has driven revenue growth, the decline in processing fees has severely eroded the profit space of the smelting segment.

China Aluminum, as a downstream representative, has profitability between upstream and downstream segments, with a net profit margin of 5.94%, operating margin of 10.80%, and ROE of 19.77% [0]. Although it has improved compared to smelting enterprises, it still cannot compare with the high profit margins of the upstream resource segment.

Upstream enterprises have resource pricing power and can directly benefit from rising commodity prices. According to market analysis, copper and aluminum prices continued to rise in 2025, bringing substantial gains to resource segment enterprises [1].

Upstream resource enterprises have high industry entry barriers and monopolistic characteristics, while midstream smelting faces fierce homogeneous competition. Some analyses point out that Chinese copper smelting enterprises are in a deadlock with Chilean miners in processing fee negotiations, facing the risk of negative processing fees [2].

The costs of upstream enterprises are mainly mining costs, which are relatively stable; midstream smelting enterprises are greatly affected by energy, environmental protection, labor and other costs, and their profit space is easily compressed.

Against the background of high metal prices, upstream resource enterprises have the strongest profit elasticity and pricing power.

• Zijin Mining (601899.SS): ROE of 30.60%, conservative financial status, and abundant cash flow [0]
• Companies with high-quality mineral resources and high integration levels

Valuation is no longer cheap, with a PE multiple of 18.43x; need to be alert to price correction risks

Choose leading enterprises with cost advantages, technological leadership, and integration.

• Enterprises with strong cost control capabilities
• Enterprises with vertical integration layout
• Leading enterprises with discourse power in processing fee negotiations

Seek downstream enterprises that can extend to high-value-added products and have technological innovation capabilities.

• Metal processing related to new energy vehicles
• Special materials for high-end manufacturing
• Enterprises with import substitution capabilities

According to the latest report from Morgan Stanley, the industrial metal super cycle may have arrived, and it is optimistic about the demand for copper driven by U.S. power investment in 2026, as well as the demand for aluminum driven by energy storage and substitution demand [1].

As processing fee negotiations enter a critical period, the profitability of midstream smelting enterprises may further diverge. Need to pay close attention to:

• The determination of the processing fee benchmark [2]
• Enterprise cost transfer capabilities
• Changes in industrial policies

• Short-term:
  Focus on performance realization capabilities, and prioritize allocation to high-certainty upstream targets
• Mid-term:
  Focus on industry chain integration opportunities and layout niche leaders with growth potential
• Long-term:
  Focus on structural opportunities brought by new energy transformation and prioritize allocation to related targets

1. Price Volatility Risk:
   Metal prices are greatly affected by macroeconomics and monetary policies, and there is a risk of correction
2. Policy Risk:
   Tighter environmental protection policies may increase enterprise costs
3. Geopolitical Risk:
   Policy changes in resource countries may affect supply security
4. Exchange Rate Risk:
   Internationally priced commodities are affected by exchange rate fluctuations

Against the backdrop of record-high copper and aluminum prices, the investment in the non-ferrous metal industry chain should adopt the strategy of ‘

’. At the current stage, it is recommended to focus on allocating upstream leading enterprises with resource pricing power, while paying attention to midstream leaders with high industry chain integration and cost advantages, as well as downstream niche market leaders with布局 in emerging fields such as new energy and high-end manufacturing.

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[0] Jinling API Data - Financial data of Zijin Mining (601899.SS), Jiangxi Copper (600362.SS), China Aluminum (601600.SS)
[1] Yahoo Hong Kong Finance - “Hong Kong Stocks Extend Afternoon Drop to 300 Points; Copper, Aluminum, Gold Mining Stocks Under Pressure”
[2] Bloomberg - “China Copper Smelters, Chile Miner in Deadlock Over Fee Talks”
[3] Yahoo Hong Kong Finance - “《Dahang》Morgan Stanley’s Investment Ratings and Target Prices for Metal and Building Material Stocks”