Tianfeng Securities·2025-09-05 01:28Core Insights - The report emphasizes the ongoing trend of "anti-involution" in the copper smelting industry, driven by economic slowdown and the need for industry self-discipline to prevent vicious competition [3][4][6] - The copper smelting sector is facing significant losses, necessitating a focus on capacity optimization to improve profitability [3][22] - The report suggests that the copper industry is expected to return to profitability in the long term, with an emphasis on optimizing capacity and improving operational efficiency [3][22] Industry Overview - The "anti-involution" movement was first highlighted in a Politburo meeting on July 30, 2024, aiming to strengthen industry self-discipline and prevent harmful competition [3][5] - The copper smelting industry is currently experiencing substantial losses, with the need for a shift towards capacity optimization and the elimination of outdated production methods [3][22] - The report identifies the mismatch between copper mining and smelting capacities as a critical issue, with domestic smelting capacity expanding while raw material supply remains heavily reliant on imports [45][49] Economic Context - The report draws parallels between the current "anti-involution" movement and previous supply-side reforms, both occurring in a context of economic growth slowdown [7][9] - It highlights that both periods experienced declining GDP growth rates and prolonged periods of negative Producer Price Index (PPI) [9][10] - The current economic environment is characterized by weaker demand on the consumer side, exacerbating challenges for industries like copper smelting [10][14] Capacity Optimization Strategies - The report outlines key strategies for optimizing copper smelting capacity, including the elimination of outdated production capacity and the adoption of advanced smelting technologies [3][52] - It emphasizes the importance of constructing high-standard smelting facilities and effectively utilizing recycled resources [3][52] - The report suggests that companies with cost advantages in smelting are likely to have stronger profitability as the industry undergoes restructuring [3][22] Investment Opportunities - The report recommends focusing on companies with smelting cost advantages and those involved in mining and smelting integration, such as Zijin Mining, Western Mining, Jiangxi Copper, and others [3][22] - It indicates that the copper smelting industry may see a turnaround in profitability as capacity mismatches are addressed and operational efficiencies are improved [3][22] Challenges and Risks - The report notes that the copper smelting industry is currently facing significant challenges, including high production costs and a reliance on imported raw materials [3][45] - It highlights the need for the industry to adapt to changing market conditions and regulatory environments to mitigate risks associated with overcapacity and competition [3][22]