Strong copper, weak lithium! Basic materials “investment map” for the second half of 2025: leaders continue to strengthen, and these targets need to “avoid holes”

The Zhitong Finance App learned that Bank of America indicated in its latest report that the commodity sector will show a trend of differentiation in the second half of 2025. Among them, gold, aluminum, and copper are still the first choice. In particular, the price of copper is most optimistic. It is expected to exceed 10,000 US dollars per ton in 2026; while polysilicon, coking coal, and lithium are facing downward pressure. The report predicts weak demand for real estate, a slowdown in electric vehicle sales growth, negative growth in demand for home appliances, and a decline in solar installed capacity (down 30% year over year), but investment in power grids should be strong.

In the Bank of America report, gold was the first choice, followed by aluminum/copper, and the most bearish on polysilicon, coking coal, and lithium.

In the second half of 2025, Bank of America expects: 1) the weak demand for real estate; 2) the year-on-year growth rate of electric vehicle sales will weaken month-on-month (the growth rate was 10% in the second half of the year, compared to 44% in the first 5 months); 3) negative growth in demand for home appliances from the fourth quarter of 2025 to the first half of 2026; and 4) solar installed capacity will drop 30% year over year. However, grid investment should be strong.

Bank of America expects the leaders to continue to lead, and the laggards will fall further behind.

After gold rose sharply in the first half of the year and the Bank of America expressed concerns about solar energy, the Bank of America was most optimistic about copper and the most pessimistic about solar materials.

As a result, Bank of America downgraded Xinyi Solar's rating from buy to neutral, and Luoyang Molybdenum Industry (CMOC)'s rating from neutral to buy. Bank of America's top choices are Zijin Mining (02899), Shandong Gold (01787), and China Hongqiao (01378). Bank of America highlighted these underperforming targets: Tongwei Co., Ltd. (600438.SH), Ganfeng Lithium (01772), and Tianqi Lithium (09696). See the table below for details:

Most optimistic about copper; still optimistic about gold and aluminum

Bank of America Global Research raised its 2025 copper price forecast by 8% to $9557 per ton, and expects the price of copper to exceed $10,000 per ton in 2026.

As production from the Camoa-Kakura copper mine and Chile is limited in long-term supply, TC/RC (processing fee/refining fee) is negative, which may lead to production cuts. China's inventory on the London Metal Exchange (LME) is low, and strong grid investment (accounting for more than 40% of copper demand) and a possible rebound in EU demand should offset the effects of a slowdown in solar installations (accounting for about 3% of China's copper demand) and high US inventories.

Gold prices may not rise as strongly in the second half of 2025 as demand for jewellery weakens, but the Bank of America remains optimistic. The 2025 annuity price is expected to be $3,356 per ounce (up 11% year over year) due to rising US budget deficits, fluctuating interest rates, and the weakening dollar.

As for aluminum, despite concerns about a slowdown in installed solar energy (accounting for about 10% of China's alloy demand) and continued weakness in real estate, it is expected that there will still be a healthy profit margin in the 2000-3000 yuan range due to lower coal/electricity costs, and there is no new supply in China, and import costs are supported by about 200,000 yuan/ton.

Preferred target: Zijin Mining (gold and copper business, with an expected price-earnings ratio of 11 times in 2025, most sensitive to gold prices). Bank of America raised China Hongqiao's PoS (target price)/investment rating (8% yield), China Aluminum (there is potential for an upward dividend), and Zhaojin Mining. Bank of America raised the Luoyang Molybdenum Industry (CMOC) rating based on strong copper prices and an expected price-earnings ratio of 9 times in 2025 (19 times the global peer average).

Bearish on solar materials; lithium is currently too early to buy

Bank of America is bearish on solar materials and lowered the polysilicon price forecast to 40,000 yuan per ton because demand is likely to drop drastically and inventories are still high even if production continues to be cut.

Bank of America notes that the price of lithium in China has fallen to about 66,000 yuan/ton, but it will take time to achieve a sharp rebound due to 8% oversupply, flattening the cost curve, increased supply, and high inventories (130,000 tons; 30% year-on-year increase).

Bank of America lowered its 2025 lithium price forecast to RMB 65,000 per ton (down 28% year over year). As the price war continued, Bank of America downgraded Xinyi Solar's rating from buying to neutral. Bank of America reiterated ratings for the poor performance of Tongwei Co., Ltd., Ganfeng Lithium, and Tianqi Lithium.

Neutral attitude towards cement/steel; focus on “investment in key areas”

Despite a 3% drop in demand, Bank of America reiterated its neutral view on steel. Production cuts will be moderate and scattered, and exports are expected to remain high at 104 million tons (flat year over year). Demand for cement is expected to drop 6% due to weak real estate.

As coal and iron ore prices fall, profit margins in the cement and steel industry should improve moderately year over year. If the 500 billion yuan “investment in key areas” incentive measures are implemented, cement (especially Conch Cement) will benefit the most (there is potential for management incentive programs, and valuation requirements are not high).