J.P. Morgan: Asia Basic Materials — Coal and Aluminum to Outperform Near Term, Buy Quality Miners on Dips
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Key Views
Coal: Geopolitical premiums are driving near-term upside. A-share coal stocks rose 2–9%. Sustainability hinges on potential Strait of Hormuz disruptions; any de-escalation could trigger profit-taking.
Aluminum: Sentiment corrections overlooked supply risks. Middle East production reaches 6.8 million tonnes annually, with net exports near 5 million tonnes (7% of global supply). Severe disruption could push prices rapidly to $4,000/tonne, offering the most asymmetric upside among base metals.
Copper: Despite visible inventories at 1.2 million tonnes (the highest since 2018), J.P. Morgan forecasts a 130,000-tonne global deficit in 2026. Simultaneous restocking by the US and China could significantly strain ex-US inventories.
Lithium: Carbonate prices fell 12% to RMB 151,000/tonne. Prices are expected to stabilize near this level amid near-term headwinds. Neutral ratings maintained on Tianqi Lithium and Ganfeng Lithium.
Recommended Securities
- Yankuang Energy (1171.HK): Neutral, HKD 14.32
- Aluminum Corporation of China (2600.HK): Overweight, HKD 13.99
- China Hongqiao (1378.HK): Overweight, HKD 36.70
- Zijin Mining (2899.HK): Overweight, HKD 43.22
- Ganfeng Lithium (1772.HK): Neutral, HKD 59.15
- Tianqi Lithium (9696.HK): Neutral, HKD 42.68