2026-01-13 11:56Summary of Key Points from the Conference Call Industry Overview - The focus is on the Basic Materials sector in China, with a preference order for 2026 being copper/gold > aluminum > lithium > coal > steel [2][4] - The MSCI China Materials index is expected to outperform the MSCI China index by 3% in the first week of January 2026, driven by supply disruptions and mergers and acquisitions [2][4] Company-Specific Insights - Zijin Mining is highlighted as the top pick for 2026, with a positive profit alert projecting a 2025 net profit of RMB 51-52 billion, representing a 59-62% YoY increase [4][9] - Jiangxi Copper (JXC) has been upgraded to Neutral (N) due to a positive outlook on copper, despite a recent 40%+ share price surge that has factored in the acquisition of SolGold [2][5] - Baosteel and Angang Steel have been downgraded to Neutral (N) and Underweight (UW) respectively, due to low steel margins and weaker-than-expected anti-involution efforts [2][5] Market Dynamics - Supply disruptions are expected to continue, with South32 placing its Mozal Aluminum smelter on care and maintenance in March 2026, and a strike at Capstone Copper's Mantoverde mine expected to reduce copper supply by 77kt [4][9] - The Chinese base metal demand growth is forecasted to slow to 2.5% for copper and 1.5% for aluminum YoY [4][9] Earnings Forecasts - 4Q25 earnings for steel companies are projected to be the weakest, with Angang and Baosteel expected to see earnings declines of 86% and 33% respectively [4][11] - Zijin and CMOC are expected to report solid growth, with CMOC anticipated to announce a positive profit alert with a 53% YoY increase [4][11] Stock Recommendations - Bullish on copper and bearish on steel; Zijin remains the top pick for its copper/gold exposure [5][11] - Hongqiao and Chalco are recommended as buyers on dips due to the positive correlation between aluminum and copper prices [5][11] Regulatory and Policy Impacts - The Ministry of Commerce reinstated steel export licensing from January 1, 2026, which may lead to increased near-term exports and keep global prices under pressure [9] - Regulatory uncertainties in lithium mining rights are highlighted, particularly with the cancellation of mining rights affecting Tianqi and Ganfeng [9] Commodity Price Forecasts - Copper prices are forecasted to reach $12,000/ton in 1Q26, while aluminum prices are expected to stabilize around $3,000/ton [12][14] - Lithium prices are projected to increase significantly, with battery-grade lithium expected to reach $17,500/ton by 2026 [14] Conclusion - The Basic Materials sector in China is poised for a challenging yet opportunistic year in 2026, with significant variations in performance across different commodities and companies. The focus on supply dynamics, regulatory impacts, and strategic acquisitions will be crucial for investors navigating this landscape.