The Zhitong Finance App learned that Orient Securities released a research report saying that the copper sector trading logic is gradually changing from expectations to actual transactions. The shortage of copper ore is transmitted to the copper refining process or has become a reality, while the power grid/AI and the US are strongly supported by demand for copper storage. When the market's expectations for the Fed's interest rate hike were previously pessimistic, it is likely that there will be a recovery window for liquidity expectations in the future, and the copper sector is expected to resonate with rising profits and valuation fixes.
Orient Securities's main views are as follows:
The bank believes that the current trading logic of the copper sector has gradually changed from expectations to actual transactions
The contradiction between supply and demand for electrolytic copper in 2025 is not prominent; fluctuations in copper prices are mainly due to changes in expectations. However, after experiencing a fall in March 2026, copper prices quickly rebounded back to a high level, but copper stocks remained low. In this process, the valuation side was mainly suppressed (not the company's profit). Judging from the most intuitive inventory data, although domestic electrolytic copper social inventories were significantly higher in early March 2026 than in 2025, after copper prices fell in March, the rate of inventory removal exceeded market expectations. As of July 10, domestic copper social inventories fell from a high of 577,200 tons to 165,000 tons, a drop of 71%. The tight supply and demand logic behind rapid storage is gradually being implemented, and the copper sector trading logic is gradually shifting from expectations to actual transactions.
Supply side: Copper is scarce and heated, and is expected to transfer to refined copper
Since 2025H2, global copper production has continued to decline. As the world's largest producer of copper, Chile's copper production declined by about 8% year-on-year from January to April 2026. The measurable increase in global copper production from 2026-2027 is also limited. Due to the obvious marginal tightening of copper concentrate raw materials and copper scrap raw materials, domestic crude copper production has declined markedly in recent months. From April to May 2026, China's crude copper production was 97/960,000 tons, compared with -14%/-3%, respectively. The bank believes that the shortage of copper ore will be transmitted to the copper refining process in the second half of the year or a probable event.
Demand side: power grid & AI dual drive, “hoarding copper” demand raises prices
In terms of power grids, from January to May 2026, the total investment amount of the national grid was 23.9 billion yuan, an increase of 13% over the previous year. Considering the 4 trillion yuan investment plan previously announced by the State Grid, the power grid investment plan is expected to support a high increase in demand for copper for electricity. The four core modules of AI data centers all require the same transmission medium. In 2025, copper used in data centers accounts for only about 2% of global copper demand. With the explosive growth in demand for computing power, it is estimated that the total amount of copper used in global data centers is expected to reach 1.4 million tons in 2030, which is expected to contribute to explosive demand growth; in addition, since 2025, the US market's siphon effect on global copper inventories has become an important demand-side support. Currently, US President Trump is in a 90-day window to sign the copper tariff enforcement order, and the 232 copper tariff resolution is nearing implementation. Considering America's own copper usage gap, 2026H2 copper storage demand may continue.
Liquidity expectations are gradually reversed, and the copper sector is expected to experience a double hit
The market previously anticipated that the Fed would raise interest rates 2-3 times in 2026-2027, which is obviously too pessimistic. Recently, interest rate hikes have been gradually revised. In recent months, US inflation was mainly contributed by the energy segment and the job market has shown signs of weakening. Considering that the current interest rate level of the Federal Reserve is still high since 1990, there may also be limited room for actual rate hikes. Currently, the copper sector's valuation has reached a low level. When the expected liquidity recovery window approaches, the bank believes that copper prices may exceed expectations, and the copper sector is expected to resonate with profit revisions and valuation repairs.
Risk Alerts
The supply-side release exceeded expectations, downstream demand fell short of expectations, the hawkish Federal Reserve exceeded expectations, geopolitical risks, the risk of inaccurate production statistics, and changes in hypothetical conditions affected the calculation results.