How is the cycle of nonferrous commodities reflected in the A-shares market?
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This round of commodity market trends shows clear differences compared with previous situations, with energy and non-ferrous metals diverging.
The latest research report released on January 22 by the strategy team of Great Wall Securities (Wang Yi, Wang Zhengjie) pointed out that since 2022, the commodity market has been fundamentally different from the previous four bull cycles, with energy and non-ferrous metals showing a “split” trend.
Great Wall Securities noted that the performance of non-ferrous metal stocks depends not only on commodity prices, but is also deeply influenced by the overall environment and style rotation of the A-share market. Industrial metal stocks show much greater upward elasticity than commodity prices in bull markets, while precious metal stocks are closely correlated with commodity prices, showing relatively independent market behavior.
Report summary: Sectors based more on “forward-looking logic” (copper, aluminum, energy metals) contribute more to valuations; sectors based more on “current profits” (precious metals) see commodity and stock price movements that are more synchronized.
The New Pattern after Four Commodity Bull Cycles
The report reviews four typical commodity bull markets since 2004: global demand expansion (2004-2008), liquidity easing (2009-2011), supply-side reform (2016), and COVID-19 recovery (2020-2022). In these cycles, the commodity index rose overall, with precious metals and energy leading industrials.
After 2022, the commodity market has shown significant divergence: after sharp volatility, energy and ferrous sectors have stabilized and declined, while non-ferrous metals, especially precious metals, have risen strongly.
Weak global economic recovery, geopolitical conflict, and green transition together have shaped this “split” trend. The report emphasizes that previous commodity bull markets were highly synchronized with PPI, with commodity prices typically leading the bottoming and rebound of PPI.
Industrial Metals Are More Deeply Influenced by the A-Share Market
The report focuses on the transmission mechanism between non-ferrous commodity prices and stock sectors. Commodity prices lead the initiation of stock sectors, but the lag and elasticity of industrial metal stocks are more affected by the overall performance of A-shares. In the “924” markets of 2006-2007, 2014-2015, and 2024, industrial metal stock gains greatly outperformed commodity prices; whereas during the A-share growth-driven period of 2019-2021, industrial metal stock elasticity was actually weaker than commodity prices.
Precious metals, on the other hand, display more independence. The report notes that since 2018, the gold sector has shown relatively independent performance, with a high correlation between commodity prices and stock prices (correlation coefficient 0.5-0.9), while the correlation for industrial metals is only 0.2-0.3.
Valuation Elasticity Has Surpassed Commodity Price Elasticity
Data from early 2025 to now reveals a new market feature: Valuation elasticity of A-share non-ferrous metal subsectors is significantly greater than commodity price elasticity. Stock prices for copper, aluminum, and energy metals have risen much more than the corresponding futures indices, while precious metals “follow but do not magnify.”
Report summary: “The more ‘forward-looking logic’-driven the sector (copper, aluminum, energy metals), the greater the valuation contribution; the more ‘current profit’-driven the sector (precious metals), the more synchronized commodity and share price movements are.”
This conclusion suggests to investors that, under the current market environment, the industrial metals sector reflects market risk appetite and industry trend expectations more than simply tracking commodity price fluctuations.
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