Looking at the data from the top ten sectors in terms of price changes over the past three months, the non-ferrous metals sector leads with a 26.08% increase, and even this year it has shown a 16.60% return performance.

Currently, my investment view on the non-ferrous metals sector is that there is a risk of short-term price correction. Looking forward, the medium to long-term upward trend has not been broken. Specifically, since the beginning of this year, global demand expectations have bottomed out and rebounded, the new energy industry has continued to expand, and supply risks have heated up, driving non-ferrous metal prices sharply higher. It is expected that short-term prices may peak and the risk of downward movement is relatively large, or they may remain at high levels. However, the non-ferrous metals sector has long-term investment value.

By definition, non-ferrous metals are collectively referred to as all metals except iron, manganese, and chromium (black metals). Although non-ferrous metals only account for 5% of the total metal output, their uses are more extensive and diverse. Non-ferrous metals can mainly be divided into three categories: precious metals, industrial metals, and rare metals.

The pricing logic of non-ferrous metals: the game and resonance of commodity attributes and financial attributes.

Firstly, commodity attributes: the supply and demand relationship is the decisive factor for prices. In March 2024, both China's and the global manufacturing PMI indexes have rebounded to the 50% threshold. The steady and rising global economy is expected to drive the non-ferrous metals sector to accelerate into the inventory replenishment cycle. Coupled with the release of incremental demand in new applications and new business forms, the supply and demand mismatch in non-ferrous metals is expected to be alleviated, which may drive the rise in raw material prices.

Secondly, financial attributes: the level of liquidity affects price fluctuations. Non-ferrous metals, which are mostly priced in US dollars internationally, have significant financial attributes and are highly sensitive to liquidity. Excess liquidity will lead to a decrease in real investment interest rates and an increase in inflation expectations. Holding physical assets such as precious metals is often seen as an effective means of hedging against inflation. Therefore, over the long term, the non-ferrous metal price index has been negatively correlated with the US dollar index.

Speaking of this, we must see that the Federal Reserve's interest rate hike cycle has essentially come to an end. From Switzerland's first shot in lowering interest rates among developed economies to the Federal Reserve's March interest rate meeting pointing out that the interest rate for this cycle has reached its peak, the global monetary policy shift towards easing has become increasingly clear, which is expected to continue to catalyze the non-ferrous metals sector.

Thirdly, there are different core drivers within the non-ferrous metals sector. As mentioned earlier, within the non-ferrous metals sector, there are three types of subcategories, each with its own growth logic.

Preeious metals, represented by gold, are more traditional safe-haven assets. As a supranational credit carrier, they are not controlled by the monetary policy of a single country, and their financial attributes are particularly prominent when global risks intensify. Under the current world economic and political background, when uncertainty increases, the market tends to rise.

Industrial metals have a strong cyclicality, and the main drivers of the market are whether there are unexpected changes in the supply and demand relationship. Driven by gold, the market has also given higher expectations for metals such as copper and aluminum, making industrial non-ferrous metals also perform brightly recently. From a commodity attribute perspective, both copper and aluminum have shown more positive changes on both the supply and demand sides.Rare metals, though in smaller quantities, are also indispensable raw materials for many high-end manufacturing industries. In the short term, they are driven by supply and demand mismatches, while in the medium to long term, they will benefit from the development of advanced technologies.

After 2024, the prices of lithium and rare earths have stopped falling and have shown a more obvious turning point. First, the continuous elimination of excess capacity and the year-on-year decline in the import volume of rare metals, and second, the introduction of the "equipment renewal, trade-in" policy has boosted the demand-side expectations for lithium and rare earths.