Recently, Bank of America Securities released a research report, providing an in-depth analysis of China’s base metal market in 2026, which it dubbed the “Year of the Red Horse”. The report also offered clear investment strategy recommendations, garnering widespread attention from the market.

“Year of the Red Horse”: Opportunities and Challenges Coexist in the Metal Market

Bank of America Merrill Lynch pointed out that for China’s base metal market in 2026, opportunities and challenges are intertwined. From the perspective of favorable factors, the weakening US dollar and the US interest rate cut cycle will bring benefits to the metal market. In an environment of a weakening US dollar and low interest rates, metals, as risk assets, have lower holding costs and increased willingness for capital inflows, thereby driving metal prices up.

Meanwhile, the persistent tight supply of copper and aluminum has also become an important factor supporting the metal market. In recent years, the mine-end supply of copper and aluminum globally has faced numerous challenges, such as aging mines, delayed commissioning of new projects, frequent strikes, and other incidents, which have limited supply growth. However, the demand side has shown a strong growth trend, further exacerbating the imbalance between supply and demand, providing strong support for metal prices.

On the demand side, multiple driving factors will boost the demand for base metals this year. With a year-on-year increase of 10% in grid investment, large-scale grid construction will drive the consumption of metals such as copper and aluminum. The acceleration of electrification has led to a 27% increase in demand for electric vehicle batteries. Copper, which is widely used in components such as electric vehicle batteries and motors, will directly benefit from the rapid development of the electric vehicle industry. The demand for energy storage systems has increased by 41%, and the demand for metals in energy storage systems is also on the rise. The rise of AI-driven electricity demand has brought new growth points to the metal market.

However, the market is also facing some challenges. The weak real estate and consumer markets have exerted a certain restraint on metal demand. Although anti-over-competition policies have become more balanced, their recent implementation has been weak, failing to effectively improve the market environment. Some industries still suffer from excessive competition, affecting corporate profitability and investment enthusiasm.

Investment strategy: Aluminum stocks are the top choice, with a “buy” rating for multi-metal stocks

Based on the analysis of market trends, Bank of America Securities has provided specific investment strategy recommendations. The bank’s top pick is aluminum stocks, which are seen as alternative investments to AI-powered stocks. With the rapid development of AI technology, the demand for electricity in infrastructure such as data centers has increased significantly. Aluminum plays a crucial role in power transmission and distribution. For example, aluminum alloy cables have the advantages of light weight and good conductivity, and are widely used in the power sector. Therefore, aluminum stocks are expected to benefit from the growth in AI power demand.

In addition to aluminum stocks, Bank of America Merrill Lynch holds a “buy” view on gold, copper, lithium (including battery materials), and cobalt stocks. Gold possesses a safe-haven attribute, and against the backdrop of increasing global economic uncertainty, investors’ demand for gold tends to rise, driving up the price of gold. Copper, as an important industrial metal, benefits from the growing demand in areas such as power grid investment, electrification, and energy storage systems, presenting a broad market prospect. Lithium and cobalt are key components of battery materials. With the rapid development of electric vehicles and the energy storage market, the demand for lithium and cobalt will continue to increase, and related companies are expected to gain good development opportunities.

Bank of America Merrill Lynch holds a neutral stance towards the coal industry. Although coal still occupies an important position in China’s energy mix, with the advancement of energy transformation, the development of clean energy has exerted a certain substitution effect on coal demand, and the coal market is facing certain pressure.

However, solar energy and building materials (such as steel) are viewed with skepticism. Although the solar energy industry holds vast development prospects, the current market competition is fierce, and the issue of overcapacity is prominent, which has a certain impact on corporate profits. The building materials industry is affected by the weak real estate market, with sluggish demand growth. Meanwhile, steel profit margins have declined, and the industry as a whole faces significant challenges.

Preferred stock: focus on industry leaders

Bank of America Merrill Lynch also provided specific preferred stocks, including Aluminum Corporation of China, Zijin Mining Group, China Hongqiao, Shandong Gold Group, and Ganfeng Lithium. These companies are all leading enterprises in their respective industries, possessing strong market competitiveness and risk resistance capabilities.

China Aluminum Corporation (Chalco) is one of the largest producers of alumina, primary aluminum, and aluminum processing materials in China, holding a leading position in the aluminum industry. Zijin Mining Group Co., Ltd. is a large mining group primarily engaged in the exploration and development of metal mineral resources such as gold, copper, and zinc. It boasts abundant resource reserves and continuously expanding production scale. China Hongqiao Aluminum Group Co., Ltd. is one of the world’s largest aluminum product manufacturers, possessing significant technological and cost advantages in aluminum smelting and processing. Shandong Gold Group Corporation is an important gold production enterprise in China, owning multiple large gold mines and ranking among the top in domestic gold production. Ganfeng Lithium Corporation is the world’s third-largest and China’s largest lithium compound producer, as well as the world’s largest producer of metallic lithium. It possesses strong capabilities in lithium resource development and lithium product processing.

The research report from Bank of America Securities provides valuable references for investors. However, when making investment decisions, investors need to consider their own risk tolerance and investment goals, as well as market changes and industry dynamics, to make rational investment choices.