2Q26 Preview: Stronger Metals, Weaker Construction Materials

Overview

This is a 2Q26 earnings preview for Asia-Pacific basic materials published by Bank of America on July 14, 2026. The report's main theme is 'strong metals, weak construction materials': copper, aluminum, lithium, and glass fiber are supported by prices, margins, or demand and show stronger earnings performance; cement, steel, float glass, solar glass, and waterproof materials are dragged down by weak construction demand, high inventories, raw material costs, and industry supply pressure.

Core views

The core views include: first, copper prices have risen sharply and the industry may still be in supply deficit in 2026-2027; Chinese copper miners trade at significantly lower valuations than global peers, and the report favors Zijin Mining, Jiangxi Copper, MMG, and CMOC. Second, aluminum margins improved QoQ in 2Q26, and Chalco and Hongqiao delivered strong earnings, but subsequent supply recovery may reduce market tightness. Third, lithium prices are expected to remain resilient in 2H26 on strong demand support, and Ganfeng and Tianqi are favored. Fourth, steel margins remain negative, while cement demand and prices continue to weaken. Fifth, divergence is emerging within building materials: Xinyi Glass and CNBM are relatively better due to contributions from non-construction-material businesses such as auto glass and e-glass, while Xinyi Solar, Kibing, and Yuhong face greater earnings pressure.

Analysis framework

The report combines commodity prices, industry margin tracking, company profit alerts, and volume and cost assumptions to estimate 2Q26 and 1H26 earnings, and accordingly revises FY26E-FY28E earnings forecasts and target prices. Valuation methods include P/E multiples, SOTP valuation, and DCF, and it re-selects peer groups or valuation frameworks based on changes in company business mix.

Methodology notes

• Valuation methodsSOTP

  sum-of-the-parts valuation

  Used for companies such as Xinyi Glass, valuing core businesses at FY27E P/E and adding the equity value of stakes in associates such as Xinyi Solar and Xinyi Energy.

• Valuation methodsP/E multiple

  price-to-earnings multiple valuation

  The report frequently uses FY27E P/E or average FY26-27E P/E as the basis for target prices; for example, Xinyi Solar uses 10.5x FY27E P/E, and Conch-H uses 12.0x average FY26-27E P/E.

• Valuation methodsDCF

  discounted cash flow

  The valuation table for Sinoma Science & Technology uses DCF, with parameters including a 1.7% risk-free rate, 1.20 Beta, 6.5% equity risk premium, 6.0% WACC, and 2.0% terminal growth rate.

• industry_analysisindustry margin tracker

  industry margin tracking

  The report uses price and cost tracking across industries such as copper, aluminum, steel, cement, and glass to estimate quarterly margin changes; for example, aluminum margin improved by about RMB400/t QoQ in 2Q26.

• earnings_analysisprofit alert read-through

  profit alert interpretation

  Based on profit alerts from companies such as Zijin, CMOC, Jiangxi Copper, Chalco, and Hongqiao, the report infers implied 2Q26 profits and compares them with BofA and market expectations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Zijin Mining

  A diversified mining company spanning copper, gold, and lithium; the report maintains its preference but notes that Zijin Gold Int'l dragged on 2Q performance.

  Strengths

  Rising copper prices, stronger sulfuric acid prices, and rapid lithium production ramp-up.

  Weaknesses

  Kamoa-Kakula disruption caused YoY copper production decline, while Zijin Gold Int'l saw lower-than-expected costs and production ramp-up.

  Comparison

  Chinese copper miners trade at about 7-9x FY27E P/E, below global peers at 13-23x.

  Risks

  QoQ gold price decline, mine ramp-up below expectations, rising costs, and project disruptions.

• Jiangxi Copper

  A major beneficiary of rising copper and sulfuric acid prices.

  Strengths

  The midpoint of its 1H26 profit alert is RMB8bn, reaching 82% of BofA's FY26E and significantly beating expectations.

  Weaknesses

  Sales volume did not increase meaningfully QoQ, and earnings rely on price and cost optimization.

  Comparison

  Valuation is significantly below global copper mining peers.

  Risks

  Copper price pullback, sulfuric acid price decline, hedging impact, and weaker-than-expected cost control.

• CMOC

  Earnings are supported by contributions from copper, molybdenum, and Brazilian gold assets.

  Strengths

  1H26 attributable net profit guidance of RMB15.5-16.5bn, up 79%-90% YoY and above market expectations.

  Weaknesses

  DRC copper windfall tax provisions, and declines in tungsten and gold prices, create offsets.

  Comparison

  Among copper miners, it benefits from both volume-price gains and cost management.

  Risks

  Sulfur cost, DRC taxes and fees, metal prices, and overseas asset integration risk.

• China Hongqiao

  A beneficiary of improved aluminum margins.

  Strengths

  1H26 net profit is expected to increase about 39% YoY, with 2Q26 accelerating QoQ.

  Weaknesses

  Aluminum market tightness may ease later on.

  Comparison

  The report believes valuation remains attractive.

  Risks

  New supply in China and overseas, lower aluminum prices, and rising costs.

• Chalco

  A beneficiary of improved aluminum-sector earnings.

  Strengths

  1H26 net profit guidance of RMB11.2-12.2bn, up 58%-73% YoY.

  Weaknesses

  Sensitive to aluminum prices and costs such as alumina and energy.

  Comparison

  Earnings growth is broadly consistent with the industry's margin improvement.

  Risks

  Aluminum price pullback, supply recovery, and rising costs.

• Xinyi Glass

  Float glass is weak, but auto glass improves earnings quality.

  Strengths

  Auto glass gross margin remains stable above 50% and is expected to account for about 70% of 1H26 gross profit.

  Weaknesses

  Float glass inventories remain high, and property demand is weak.

  Comparison

  The report reclassifies it as a company closer to Fuyao Glass in auto glass and raises the target price.

  Risks

  Weak property demand, slower-than-expected capacity shutdowns, delayed overseas expansion, higher fuel and soda ash costs, FX volatility, and equity dilution.

• Xinyi Solar

  A key name under pressure from solar glass oversupply.

  Strengths

  The solar farm business still provides some contribution.

  Weaknesses

  Solar glass prices are below cost, industry inventory is high, and 1H26 is expected to show a small loss.

  Comparison

  Target price cut from HK$2.3 to HK$1.9, with the valuation multiple changed to 10.5x FY27E P/E.

  Risks

  Solar glass prices, raw material and energy costs, trade policy, supply-demand risks, competition, and technological change.

• Conch Cement

  A low-valuation cement leader, but short-term earnings are dragged down by demand and prices.

  Strengths

  Cheap valuation, net cash of about RMB6.63/share, and FY26 dividend yield of about 5.7%.

  Weaknesses

  2Q cement gross profit per ton is expected to be only RMB44/t, and FY26E-28E earnings forecasts were cut by 24%-28%.

  Comparison

  The report maintains Buy but cuts the target price by 23% to HK$20.0.

  Risks

  Property and infrastructure investment below expectations, new capacity in Central and East China, and coal prices above expectations.

• CNBM

  Cement weakness coexists with rising e-glass contribution.

  Strengths

  Rising e-glass prices drive higher contribution from new materials, which are expected to account for over 70% of 2Q earnings.

  Weaknesses

  The cement business remains disappointing, and the valuation framework shifts from a cement company to an indirect new-materials leader.

  Comparison

  FY26E-28E earnings forecasts were raised by 16%-41%, but the target price was cut 10% to HK$6.0.

  Risks

  Slower property and infrastructure investment, weaker industry discipline, deleveraging difficulties, lower government subsidies, asset impairment, and Southwest flood impact.

• Kibing Group

  Exposed to both float glass and solar glass, with high earnings volatility.

  Strengths

  Plans for glass substrate production lines may attract thematic interest.

  Weaknesses

  Both float glass and solar glass are under loss pressure, and FY26E/27E earnings forecasts were cut by 75%/21%.

  Comparison

  Target price was slightly lowered to RMB5.0, with Underperform maintained.

  Risks

  Property and solar demand, capacity shutdowns, new supply, fuel and soda ash costs, FX volatility, and glass substrate execution risk.

Key data

• 2Q26 average copper priceUS$13,309/tUp 40% YoY and 4% QoQ, supporting earnings for copper miners.
• Chalco 2Q26 implied NPATRMB5.67-6.67bnUp 61%-89% YoY and 3%-21% QoQ.
• Hongqiao 1H26 estimated NPAT约RMB17.2bnThe report believes this is broadly in line with expectations, with 2Q26 earnings accelerating QoQ.
• 2026/2027 aluminum price forecastRMB23k/21k/tBofA expects aluminum market tightness in 2H26-2027 to be lower than in 2025-1H26.
• 2026/2027 gold price forecastUS$4,360/US$4,800/ozThe report notes that the US dollar, interest rates, and ETF demand may create pressure, while central bank buying provides support.
• 2026 China lithium carbonate price forecastRMB165k/tThe report expects strong demand to support prices in 2H.
• 5M26 China cement output同比下降8.6%Indicates weak construction demand, pressuring cement prices and margins.
• Conch 2Q26 forecast NPATRMB1,510mnDown 41% YoY and up 3% QoQ; target price cut to HK$20.0.
• CNBM 2Q26 forecast NPATRMB1,798mnDown 10% YoY, but rising e-glass contribution offsets cement weakness.
• Xinyi Glass target priceHK$10.5Target price raised 12% due to higher profit contribution from auto glass and adoption of SOTP valuation.
• Xinyi Solar target priceHK$1.9/shTarget price cut 18%, with FY26E/27E earnings forecasts reduced by 89%/41%, respectively.
• Solar glass inventory days47.79天As of the week ending July 9, 2026, industry inventory remained high.

Impact & implications

The investment implication is that the basic materials sector needs to be re-tiered by sub-sector and earnings drivers: metal value chains are supported by prices and supply-demand fundamentals, offering better earnings elasticity and valuation appeal; construction materials lack demand-recovery catalysts, and cheap valuations are not enough to fully offset the risk of earnings downgrades; companies with revenue contributions from non-construction-material businesses, such as auto glass, e-glass, and new materials, may earn relative premiums or more resilient earnings.

Risks

• Metal prices decline, especially copper, aluminum, gold, and lithium prices falling short of forecasts.
• China's property and infrastructure demand remains weak, causing continued pressure on sales volumes and prices for cement, steel, glass, and waterproof materials.
• Industry capacity exits are slower than expected or new supply exceeds expectations, suppressing margins for categories such as float glass, solar glass, and aluminum.
• Raw material, energy, sulfuric acid, iron ore, coking coal, soda ash, and natural gas costs rise.
• Mine production ramp-up, overseas project integration, weather disruptions, safety inspections, and tax provisions create earnings uncertainty.
• Trade policy, FX volatility, technological substitution, and intensifying competition affect valuations of solar glass, auto glass, and new-materials businesses.

What to watch

• Whether the copper market remains in supply deficit in 2026-2027, and whether Chinese copper miner valuations converge toward global peers.
• The impact of aluminum supply recovery, enforcement of the 45mnt capacity cap, and supply changes in the Middle East and Indonesia on margins in 2H26-2027.
• Whether China's property and infrastructure demand improves, especially cement shipment rates, nationwide cement prices, and gross profit per ton.
• Float glass inventory days, cold repair and capacity shutdown progress, and whether auto glass gross profit contribution continues to rise.
• Whether solar glass prices can return above break-even, and whether passively or actively cut capacity re-enters the market.
• Whether the rise in e-glass prices can be sustained, and whether the new-materials earnings contribution of CNBM and Sinoma Science & Technology is delivered.
• Differences between formal 1H26 results after company profit alerts and management's full-year guidance.