The recent surge in copper futures has significantly influenced the market, particularly for companies such as Zijin Mining and Luoyang MolybdenumThese firms not only witnessed explosive growth in their performance but also saw their stock prices establish an upward trajectory since the beginning of the yearWith the ongoing bullish trend in copper-related investments, both private and public funds have reported substantial benefits, with prominent investors like Gaoyi and Hillhouse making substantial bets on Zijin Mining.

Copper has kicked off a new investment wave.

On May 20, COMEX copper futures continued to rise, reaching a peak of 5.1990, a new historical high, outpacing both gold and silver in performance.

The bullish conditions in the U.S

copper futures market, along with the sustained increase in copper prices, have swept the A-share market into a frenzyThe copper sector index recorded a single-day increase of 6.26%, marking a new peakIn this context, Zijin Mining's daily growth hit 3.67%, pushing its market capitalisation to 512.6 billion yuan.

The soaring copper prices have not only resulted in substantial profits for leading companies like Zijin Mining but have also provided considerable returns for investors in the capital market.

The "short squeeze" in U.Scopper futures is noteworthy.

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

Data indicates that the scale of inventory in New York is relatively low compared to market positions

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According to research by CITIC Securities, COMEX copper inventory fell from nearly 30,000 tonnes at the beginning of April to 20,000 tonnes by May 17, resulting in low stock levelsAdditionally, the limited number of deliverable brands on COMEX heightens the squeeze risk.

As a consequence, COMEX copper even touched a new historical high, with the main July contract closing at a price of $11,200 per metric ton last Friday, marking a weekly increase of over 9%.

On May 20, global copper futures prices continued to soarCOMEX copper briefly hit 5.1990, setting yet another historical high, while the main contract price on the Shanghai Futures Exchange climbed to 88,940.00 yuan, closing with a rise of 5.26%.

Beyond short-term speculative drivers, the tightening supply and demand in the fundamentals stand as the fundamental reason supporting the continued rise in copper prices.

On the supply side, according to the International Copper Study Group, global copper mine production is expected to reach approximately 21.99 million tonnes in 2023, reflecting a modest year-on-year increase of 0.2%. This growth is significantly below the annual forecasts of 3% and 1.9%. Furthermore, deteriorating ore quality and tensions in labor and government relations in major copper-producing countries have led the market to anticipate tighter supply.

From the demand perspective, copper is often referred to as the "mother of all cycles," with its price highly correlated to global manufacturing activity

When the manufacturing sector begins to replenish inventories, demand for core goods from the automotive, electronics, appliances, and real estate sectors tends to drive copper prices higherAdditionally, shifts toward energy transition and new demands from the information sector are boosting copper consumption.

Morgan Stanley stated in a report that with the rapid evolution of AI technologies, copper demand is projected to experience significant growth, particularly from AI data centersBetween 2024 and 2027, copper demand from global AI data centers could surge from 200,000-500,000 tonnes annually to 500,000-1.2 million tonnes, with a compound annual growth rate of 26%.

Alongside this, U.S

inflation data for April has shown positive signalsBoth the year-on-year and month-on-month CPI and core CPI figures fell short of expectations, indicating a reduction in inflationary pressuresAnticipation of lower interest rates on the U.Sdollar has further elevated market sentiment towards copper and other non-ferrous metals.

Regarding future copper price movements, Goldman Sachs recently upgraded its year-end copper price forecast from $10,000 per ton to $12,000 per ton, raising the annual average forecast from $9,200 per ton to $9,800 per ton, while maintaining a price forecast of $15,000 per ton for 2025.

However, the continuous rise of copper futures has drawn warnings from some analysts. RJO Futures Senior Market Strategist John Caruso mentioned that while he remains "firmly optimistic" about the price trends, he fully acknowledges that copper prices are currently in an overbought territory.

The copper sector in the A-share market is undergoing a "Davis Double Play."

The central price of copper has risen, allowing relevant companies to gradually release profits, transforming their copper content into increased "gold content."

According to a research report from Huahuan Fund, the copper sector achieved revenue of 1.52 trillion yuan in 2023, with a net profit attributable to the parent company of 39 billion yuan, marking a year-on-year increase of 4.37%. In the first quarter of 2024, the sector generated 414.2 billion yuan in revenue, a 1.02% year-on-year increase, and net profit attributable to the parent company reached 13.3 billion yuan, up 28.57%.

In terms of copper resources, China’s top-tier players include Zijin Mining, Luoyang Molybdenum, and China Minmetals, with Zijin Mining leading with 73.72 million tons

Following is Luoyang Molybdenum with 30.79 million tons and China Minmetals with 11.62 million tonsThe second-tier players consist of Jiangxi Copper, Western Mining, Yunnan Copper, and Tongling Nonferrous Metals.

Taking Zijin Mining as an example, the company’s copper production for 2023 reached 1.01 million tons, an 11% increase year-on-year, making it the only Chinese enterprise to surpass the million-ton mark in copper production; it also achieved gold production of 67.7 tons, a 20% year-on-year growth, which represents nearly a quarter of China’s total gold output for 2023.

In the same year, Zijin Mining's performance defied the trend, reporting revenue of 293.4 billion yuan, up 8.54% year-on-year; net profit attributable to the parent company reached 21.12 billion yuan, an increase of 5.38%, while the non-recurring net profit stood at 21.62 billion yuan, reflecting a year-on-year increase of 10.68%.

In the first quarter, Zijin Mining produced 263,000 tons of copper, with net profit attributable to the parent company growing 15% to 6.26 billion yuan, setting a new quarterly high since the third quarter of 2022.

Apart from Zijin Mining, Luoyang Molybdenum also saw rapid growth in its performance driven by rising copper prices

In the first quarter of this year, while its revenue only grew by 4.15% year-on-year, net profit surged nearly 5.5 times, reaching 2.072 billion yuan; the non-recurring net profit grew nearly 31 times, and the cash flow from operating activities amounted to 5.478 billion yuan.

In light of the soaring profits, the copper sector has also performed exceptionally well in the capital market since the beginning of 2024. By the close on May 20, the copper sector index had risen by 28.74%, far exceeding the broader market's performance during the same periodSpecifically, Zijin Mining’s gain reached 57.65%, with its market value setting new highs at 512.6 billion yuan.

In contrast to Zijin Mining, Luoyang Molybdenum experienced an even higher increase, seeing a rise of 73.26% by May 20, ranking second in the copper sector gains, with its market value reaching 193.7 billion yuan.

Notably, Northern Copper, backed by the Shanxi State-owned Assets Supervision and Administration Commission, achieved the highest increase with a year-on-year surge of 123.8%. This growth is attributed to significant revenue and net profit increases in the first quarter of 2024, with revenue rising 112.78% and net profit climbing 23.01%.

Public and private investment funds have strategized early.

The relentless rise in copper prices has not only filled the coffers of listed companies but has also allowed an array of funds that positioned themselves early in the capital market to benefit significantly.

Data from Tiantian Fund indicates that funds heavily invested in copper and non-ferrous metals have been crucial in driving the top performances this year.

In particular, among the top ten actively managed equity funds, each, except for Huisheng Leading Selected Mixed A, has been found to hold copper-related stocks among their top ten holdings.

For example, the third-ranked fund, the Invesco Great Wall Pillar Industry Mixed A, has gained 31.25% since the beginning of this year, with Zijin Mining ranking first among its top ten holdings, accounting for about 8.26% of the total assets; Tongling Nonferrous Metals ranked second, representing 6.88% of total assets; Luoyang Molybdenum contributed 6.13%.

Overall, Zijin Mining holds the highest total shares among public funds at 1.704 billion shares, with 507 funds having stakes in the company

The single largest fund is the Huaxia SSE 50 ETF, holding 276 million shares, followed by Haitong Huashang 300 ETF and E Fund's 300 ETF with holdings of 178 million and 125 million shares, respectively.

In terms of increased holdings, Zijin Mining saw the largest increase among public funds, with an addition of 73.7062 million shares compared to the end of last yearBy the end of the first quarter, Zijin Mining had risen from being the 11th largest holding in public funds last year to the 4th largest at the end of this quarter.

Data reveals that the Dongfanghong Qiheng Three-Year Fund, managed by Zhang Feng and Wang Zhaoqing, increased its holdings in Zijin Mining by 24.6598 million shares, becoming the fund most active in boosting investments in Zijin Mining during the first quarter

It ascended as the top active stock fund holder for Zijin Mining, surpassing Huashang New Trend Selection Fund.

Moreover, Zijin Mining has also appeared in the heavyweight stock lists of various funds such as China Merchants Advantage Enterprises, Fund Research Selection, and Central European New Trend and New Blue Chips.

In addition to public funds, private equity tycoons have also made their moves in copper investments, with Gao Yi's Deng Xiaofeng being particularly noteworthyHis Gao Yi Xiaofeng No2 Letter Fund and Rui Jin's 43rd Gao Yi Xiaofeng Investment Trust made their first appearances among the top ten circulating shares of Zijin Mining and participated in the fixed increase in the fourth quarter at a price of 3.41 yuan per share, acquiring 117 million shares.

As of the end of the first quarter of this year, his largest held stock remained Zijin Mining, with its market value exceeding 10 billion yuan

Additionally, Deng Xiaofeng also held heavy stakes in China Aluminum exceeding 1.7 billion yuan and in Yun Aluminum, around 770 million yuan.

Interestingly, during the price surge of Zijin Mining in the first quarter, Deng Xiaofeng reduced his holdings by over 88 million shares and cut back his positions in China Aluminum and Yun Aluminum by approximately 73 million and 26 million shares, respectively.

Conversely, Hillhouse's funds significantly increased their holdings in Zijin Mining in the second quarter of last year, placing them among the top ten shareholdersMoreover, foreign investments have taken a positive stance, with Goldman Sachs International and UBS AG entering the ranks of Zijin Mining's top shareholders in 2023, while the Abu Dhabi Investment Authority from the Middle East also ramped up its investments in the second quarter of the previous year.