Sudden collective limit-up! Major news from the U.S. Department of Defense! Small metal concept stocks continue to rise

The sector rotation in the market is accelerating!

On the morning of February 27, the focus was still on electricity, but by the afternoon, it shifted to small metals. In the afternoon, small metal concept stocks continued to rise. Zhanyuan Tungsten, Xianglu Tungsten, Tin Industry Shares, Guoyan Platinum, China Tungsten High-tech and others hit the daily limit. The main contract for Shanghai Tin on the Shanghai Futures Exchange surged 7%, closing at 447,560 yuan/ton. The CSI Industrial Nonferrous Metals Theme Index (H11059) rose nearly 4% at one point.

On the news front, a major development came from the U.S. The country plans to use AI models developed by the Department of Defense to set reference prices for critical global mineral trade, starting with germanium, gallium, antimony, and tungsten. Additionally, suppliers to U.S. aerospace and semiconductor companies are facing an increasingly severe shortage of rare earths, mainly yttrium and scandium.

“Limit-up Wave”

In the afternoon of February 27, the small metals sector exploded. 14 stocks including Oriental Zirconium, Huaxi Nonferrous, Xianglu Tungsten, Hunan Gold, China Rare Earth, and Xiamen Tungsten all hit the daily limit.

The futures market also responded in the afternoon. The main contract for Shanghai Tin on the Shanghai Futures Exchange jumped 7%, closing at 447,560 yuan/ton. Chaos Tiancheng Futures stated that recently, global tin supply disruptions have intensified, with mine evacuations in Myanmar, export restrictions in Indonesia, and geopolitical risks in Congo pushing prices higher. Post-holiday demand and spot premiums support prices, but upward movement requires macroeconomic drivers. There is still a supply-demand gap in the medium to long term, so buying on dips is recommended.

New York silver rose up to 4% intraday, exceeding $91 per ounce; spot silver increased 2.5% intraday, above $90.3 per ounce. Spot gold broke through $5,200 per ounce, rising 0.30% during the day. After 2 p.m., the CSI Industrial Nonferrous Metals Theme Index (H11059) surged nearly 4%, and the Penghua Industrial Nonferrous ETF (159162) rose over 3.8%.

On the news front, media reports indicate that suppliers to U.S. aerospace and semiconductor companies are facing a worsening shortage of rare earths, with at least two suppliers beginning to refuse some customer orders. The shortage mainly affects yttrium and scandium, two niche metals in the 17-element rare earth family, which play crucial roles in defense technology, aerospace, and semiconductors, almost all produced in China. Additionally, the U.S. plans to use AI models developed by the Department of Defense to set reference prices for critical minerals, starting with germanium, gallium, antimony, and tungsten.

How Will Prices Evolve?

The supply and demand fundamentals for industrial metals remain supportive, with attention on post-holiday destocking efforts. U.S. January manufacturing PMI rebounded sharply to 52.6 (well above the expected 48.5), reinforcing demand expectations. Domestically, the inventory accumulation of copper and aluminum slowed in the week before the Spring Festival, processing companies’ operating rates performed reasonably well during the off-season, and downstream procurement was strong after price declines.

Orient Securities believes that the current strengthening trend in industrial products like copper and aluminum is promising, with focus on destocking after the holiday. Looking longer-term, under the support of domestic and international policies and macroeconomic optimism, industrial metals have strong downside support. As macro benefits are released and supply disruptions increase, medium- and low-stock levels will enhance price elasticity.

Regarding the recent hot topic of tungsten prices, Guoyuan Securities states that supply constraints and optimistic strategic metal value expectations still provide a solid foundation for the market. However, market sentiment is also a key factor influencing short-term fluctuations. With a generally cautious but optimistic outlook, tungsten raw material markets are likely to remain tight and prices firm.

Recently, policies banning lithium exports from major lithium-producing countries have also boosted lithium prices. Guoxin Securities believes that the supply-demand balance in the lithium industry is tightening, and they are optimistic about further price increases in the near term. On the supply side, short-term incremental capacity is limited; on the demand side, power batteries are expected to recover from March, with energy storage becoming an important marginal variable. Full-year shipment volumes are expected to grow year-on-year, with demand front-loading further tightening. Overall, global lithium supply and demand may balance by 2026, but if demand exceeds expectations, significant gaps could emerge. Under tight supply and demand, lithium salt inventories may become more prominent.

(Source: China Securities Journal)