The recent movements in the copper futures market have showcased a remarkable rise in prices, marking a new era for both the commodity and the companies involved in its productionWith key players like Zijin Mining and Luoyang Molybdenum leading the charge, these companies have not only reported explosive earnings but have also seen their stock prices soar since the beginning of the yearNotably, funds betting on copper-related firms have also reaped rich rewards, with prominent investors such as Gao Yi and Gao Ling making substantial investments in Zijin Mining.

The surge in copper prices has opened doors to new market dynamics.

On May 20, COMEX copper futures continued their ascent, reaching a peak of 5.1990, setting a new historical record and outpacing both gold and silver in performance.

As the momentum from the copper futures market drives prices upward, A-shares in China are also experiencing a rally

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The copper sector index recorded a daily increase of 6.26%, achieving a historical high, with Zijin Mining climbing by 3.67% and boasting a market capitalization of 512.6 billion yuan.

The skyrocketing copper prices not only translate into significant profits for leading enterprises like Zijin Mining but also yield remarkable returns for investors in the capital market.

The phenomenon of a "short squeeze" in the copper futures market has captured attention.

Last week, the COMEX copper market witnessed an epic short squeeze.

Data indicates that the scale of inventory at the New York Exchange is relatively small compared to the market's holding capacity

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According to research from China International Capital Corporation, COMEX copper stocks, which were nearly 30,000 tons at the beginning of April, dwindled to 20,000 tons by May 17, indicating low inventory levelsThe limited delivery brands of COMEX copper further heighten the risk of short squeezes.

This condition contributed to COMEX copper hitting an all-time high, with the primary July contract closing at around $11,200 per ton last Friday, marking a weekly increase of over 9%.

On May 20, the global market experienced another spike in copper futures pricesCOMEX saw prices reach 5.1990, while Shanghai copper futures briefly reached 88,940 yuan, closing with a 5.26% gain.

Beyond immediate speculative factors, the tightening supply and demand dynamics are fundamental to the ongoing rise in copper prices.

From the supply perspective, the International Copper Study Group reports that global copper production for 2023 is expected to be around 21.99 million tons, marking just a 0.2% year-on-year increase, which is substantially lower than the anticipated growth rates of 3% and 1.9%. Additionally, declining ore quality, environmental policies, and tense labor and government relations in key copper-producing countries are leading to expectations of supply constraints.

On the demand side, copper is often referred to as the "mother of all cycles" due to its close association with the manufacturing sector

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As global manufacturing begins to replenish inventories, the demand for core commodities such as vehicles, electronics, appliances, and real estate often contributes to rising copper pricesFurthermore, new demands arising from energy transitions and the information technology sector are further stoking copper demand.

Morgan Stanley's report suggests that with the rapid development of AI technology, the demand for copper is poised for significant growthAI data centers are anticipated to emerge as a new growth point for copper demand, with projections indicating that from 2024 to 2027, the copper requirement for global AI data centers could soar from an annual range of 200,000 to 500,000 tons in 2023 to 500,000 to 1.2 million tons by 2027, reflecting a compound annual growth rate of 26%.

Moreover, positive signals were seen in the U.S

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inflation data for AprilBoth the year-on-year and month-on-month CPI and core CPI figures came in below expectations, indicating a reduction in inflationary pressuresSpeculations surrounding potential dollar interest rate cuts further bolster market sentiment around copper and other non-ferrous metals.

Goldman Sachs has adjusted its price forecast for copper, raising the end-of-year target from $10,000 to $12,000 per ton, while the average forecast for the year increased from $9,200 to $9,800, maintaining a projection of $15,000 per ton for 2025.

However, the sustained rise in copper futures has prompted warnings from certain analystsJohn Caruso, a senior market strategist at RJO Futures, expressed that while he remains "firmly optimistic about price trends," he also "fully acknowledges" that copper prices are currently in an overbought territory.

The A-share market's non-ferrous sector has experienced a "Davis double play."

As copper prices rise, related enterprises are gradually releasing profits, leading to a direct conversion of copper content into "gold content."

According to a research report from Huaxin Fund, the copper sector is projected to achieve revenue of 1.52 trillion yuan in 2023, with a net profit attributable to shareholders of 39 billion yuan, reflecting a year-on-year growth of 4.37%. In the first quarter of 2024, revenue reached 414.2 billion yuan, a 1.02% increase year on year, with net profit attributable to shareholders at 13.3 billion yuan, showing a year-on-year increase of 28.57%.

In terms of copper resources, the first tier companies in China include Zijin Mining, Luoyang Molybdenum, and China Minmetals, with Zijin Mining leading at 73.72 million tons, followed by Luoyang Molybdenum at 30.79 million tons and China Minmetals at 11.62 million tons

The second tier comprises Jiangxi Copper, Western Mining, Yunnan Copper, and Tongling Nonferrous Metals.

For instance, Zijin Mining showcased impressive performance in 2023, registering a copper production output of 1.01 million tons, a year-on-year increase of 11%, making it the only Chinese company to break the one-million-ton markThe gold production output reached 67.7 tons, reflecting a 20% year-on-year growth, amounting to nearly a quarter of China's gold production.

During this period, Zijin Mining reported resilient earnings, achieving revenue of 293.403 billion yuan, up 8.54% year on year, and a net profit attributable to shareholders of 21.119 billion yuan, a year-on-year increase of 5.38%. After deducting non-recurring gains, the net profit attributable to shareholders reached 21.616 billion yuan, reflecting a growth of 10.68%.

In the first quarter, Zijin Mining produced 26.3 million tons of copper, with net profit attributable to shareholders increasing by 15% to 6.26 billion yuan, reaching the highest quarterly net profit level since Q3 2022.

In addition to Zijin Mining, Luoyang Molybdenum also experienced rapid growth due to rising copper prices

In the first quarter of this year, although Luoyang Molybdenum's revenue only grew 4.15% year on year, its net profit soared nearly 5.5 times to reach 2.072 billion yuan, with the net profit after excluding non-recurring items increasing nearly 31 times, while cash flow from operating activities amounted to 5.478 billion yuan.

Thanks to this profit surge, 2024 has seen exceptional performance from the copper sector in the capital marketBy the close on May 20, the copper sector index had risen 28.74%, significantly outperforming the broader market during the same period. Specifically, Zijin Mining's stock surged by 57.65%, with its market capitalization consistently reaching new heights of 512.6 billion yuan.

In comparison, Luoyang Molybdenum's stock increase was even more pronounced, recording a rise of 73.26% as of May 20, placing it second in the copper sector's performance, with a market value of approximately 193.7 billion yuan.

It is noteworthy that in this stock price competition, Northern Copper, under the Shanxi State-owned Assets Supervision and Administration Commission, topped the list with a remarkable 123.8% increase during the same period

From the company’s fundamentals, Northern Copper saw significant revenue and net profit growth in Q1 2024, with revenue increasing by 112.78% year on year and net profit rising by 23.01%.

Institutions have drawn early positions in the market.

In fact, the rise in copper prices has substantially benefited listed companies while also providing fruitful returns to a plethora of funds that positioned themselves early in the capital market.

According to data from Tiantian Fund, the substantial holdings in copper metal direction have significantly contributed to the stellar performance of several funds this year.

Specifically, in the realm of actively managed equity funds, all but one of the top ten funds, including Huisheng Leading Preferred Mixed Fund A, had copper-related nonferrous metals among their top ten holdings.

For example, the third-ranking fund, the Invesco Great Wall Pillar Industry Mixed Fund A, has seen a year-to-date increase of 31.25%, with Zijin Mining representing the largest portion of approximately 8.26% among its top ten holdings, followed by Tongling Nonferrous Metals at around 6.88% and Luoyang Molybdenum at roughly 6.13%.

Overall, Zijin Mining leads in public fund holdings with a total of 1.704 billion shares across 507 funds

The most significant among these is the Huaxia SSE 50 ETF, holding 276 million shares, while Haitong and E-Fund's different ETFs hold 178 million and 125 million shares respectively, ranking second and third.

In terms of increase, Zijin Mining saw the largest increment in public fund holdings, increasing by 73.7062 million sharesBy the end of Q1, Zijin Mining upgraded its status from the 11th largest holding in public funds at the end of 2022 to the fourth largest at the end of Q1 this year.

Data shows that the Dongfanghong Qiheng Three-Year Fund, managed by Zhang Feng and Wang Zhuo, increased its holdings in Zijin Mining by 24.6598 million shares, making it the top fund to boost its stake in Zijin Mining during Q1. This fund has now surpassed Huashang New Trend Preferred Fund in terms of copper holdings.

Moreover, Zijin Mining is also listed among the top holdings in the quarterly reports of various funds including the CMA Advantage Enterprise Fund, the Fullgoal Research Selection Fund, and the China Europe New Trend and China Europe New Blue Chip funds.

In addition to public funds, private equity firms are also establishing positions in copper metals, with the most notable being Gao Yi's Deng Xiaofeng

His Gao Yi Xiaofeng No2 Fund and Rui Jin No43 Fund first appeared among the top ten circulating shares of Zijin Mining and participated in the private placement in Q4 at 3.41 yuan per share for 117 million shares.

By the end of Q1 this year, his top holding was still Zijin Mining, with a single stock market value exceeding 10 billion yuanAdditionally, Deng Xiaofeng holds significant shares in Chalco valued at over 1.7 billion, as well as around 770 million in Yunnan Aluminum.

Notably, during the upward momentum of Zijin Mining's stock price in Q1, Deng Xiaofeng took the opportunity to offload over 88 million shares and also reduced his holdings in Chalco by approximately 73 million shares and Yunnan Aluminum by 26 million shares.

Conversely, funds under Hillhouse Capital substantially increased their stakes in Zijin Mining during Q2 last year, positioning themselves among the top ten shareholders