Recently, Dongfang Securities released a research report, issuing a “Buy” rating for Tongling Nonferrous for the first time. This move has sparked significant attention within and outside the copper industry, highlighting the market’s focus on the company’s future development.
Full Value Chain Advantage Strengthens Development Foundation
As a leading domestic producer of cathode copper, Tongling Nonferrous boasts over 1.7 million tons of smelting capacity, positioning it as a key player in China’s copper market. After years of focused development, the company has successfully established a complete “resources–smelting–processing” value chain. This integrated layout provides a significant competitive edge.
At the resource end, stable supply underpins growth. Tongling Nonferrous secures raw materials through a combination of self-owned mines and strategic partnerships with domestic and international suppliers, ensuring steady input for smelting and processing operations. In smelting, large-scale capacity generates economies of scale, lowers unit costs, and strengthens pricing power. Extending into processing allows the company to serve end markets directly, offering diversified, high-value products tailored to customer needs, further enhancing profit potential.
Profit Flexibility Amid Short-Term Challenges
Despite its clear advantages in the full value chain, Tongling Nonferrous faces certain challenges since 2024. Tightening copper ore supply has led to a decline in smelting fees, slightly impacting gross margins and raising market concerns over whether large smelting capacity could compress profits.
However, a closer look at market dynamics suggests a more optimistic picture. Copper price trends are increasingly upward, signaling positive prospects for producers. As the global economy gradually recovers and emerging industries continue to drive copper demand, prices are expected to rise steadily. Smelting fees may also see marginal improvement as new mines come online and extraction technologies advance, while industry structure and policy may further support fee recovery. With substantial smelting capacity, Tongling Nonferrous is well-positioned to benefit from rising copper prices and recovering smelting fees, enhancing profit flexibility.
High-End Market Strategy Opens New Growth Engines
While consolidating traditional strengths, Tongling Nonferrous actively targets the high-end copper processing market with forward-looking strategies. Its subsidiary, Tongguan Copper Foil, successfully spun off in 2022, providing a broader platform for growth and focusing on high-end electronic copper foil R&D and production.
In the era of AI and advanced electronic communication, demand for high-performance electronic copper foil is surging. AI applications require high-performance servers and data centers, while communication technology upgrades demand higher component performance. Tongguan Copper Foil, with advanced technology and quality products, is well-positioned to capture a larger market share, creating new profit avenues for the company.
Byproduct Segment Supports Profit Growth
Beyond copper and high-end processing, Tongling Nonferrous’ byproduct segment, including gold, continues to contribute to profits. During copper mining and smelting, certain precious metals are produced as byproducts. The company leverages advanced technology to efficiently recover and refine these materials, maximizing resource utilization. With fluctuations in gold prices and market demand, this segment is expected to generate additional profits, strengthening overall profitability and resilience.
Conclusion: Strong Potential and Competitive Edge
With its full value chain, profit flexibility amid short-term challenges, forward-looking high-end market layout, and stable byproduct contribution, Tongling Nonferrous demonstrates strong growth potential and competitiveness. Dongfang Securities’ inaugural “Buy” rating underscores confidence in the company’s future. Amid the dynamic copper market, Tongling Nonferrous is well-positioned to embark on a new profit growth trajectory, delivering attractive returns to investors.
Source：Changjiang Nonferrous Metals Network