Copper:
Overnight, copper prices both domestically and internationally experienced a rise followed by a decline, with the import window for domestic refined copper closing. On the geopolitical front, former U.S. President Trump has recently signaled that a U.S.-Iran agreement could be reached "soon," stating negotiations are in their final stages and suggesting a possible deal within "two or three days." He also indicated the Strait of Hormuz would reopen upon an agreement. However, a minor escalation in conflict between the two sides yesterday has renewed market concerns. In the short term, market focus, aside from the U.S.-Iran talks, is centered on the upcoming Federal Reserve meeting in June. As this will be Fed Chair Powell's first meeting of his new term, market attention is on the inclination for interest rate expectations and Powell's stance on monetary policy. Regarding inventories, LME stocks decreased by 4,125 tonnes to 372,650 tonnes. SHFE copper warehouse receipts increased by 499 tonnes to 95,543 tonnes, while BC copper warehouse receipts rose by 2,227 tonnes to 13,033 tonnes. On the demand side, the drop in copper prices has spurred downstream procurement. However, new orders from end-users have not increased, reflecting some seasonal weakness. The minor escalation in U.S.-Iran tensions last night has sparked market concern. Furthermore, ahead of the Fed's June meeting, the market is adopting a cautious stance regarding Powell's potential comments on inflation and monetary policy. Macro headwinds may persist, likely continuing to exert downward pressure on the copper market. Fundamentally, expectations of tightening supply continue to support bullish sentiment, but the anticipation of a seasonal weakening in demand is also growing. Overall, a cautious approach is advisable in the near term.
Nickel & Stainless Steel:
Overnight, LME nickel fell 2.2% to $17,995 per tonne, while SHFE nickel dropped 1.34% to 135,620 yuan per tonne. LME inventories increased by 630 tonnes to 274,848 tonnes. The LME 0-3 month cash-to-three-months spread remained in negative territory. The premium/discount for imported nickel increased by 50 yuan per tonne to -400 yuan per tonne. News emerged that Indonesia's mining minister indicated the country might ease mineral production quotas if prices remain favorable. Supply is showing signs of active contraction. On one hand, a mine in Indonesia has entered a maintenance phase due to quota issues. Based on policy, additional quota volumes may be added in the second half of the year. Projecting from Indonesia's January-April nickel ore production, the annual total could reach nearly 280 million wet tonnes. On the other hand, following a previous policy adjustment to the HPM (Harga Patokan Mineral), factors like nickel ore and sulfur prices have led to reduced operational loads at some Indonesian projects. On the demand side, production schedules for June indicate ternary material output is expected to remain flat month-on-month, while stainless steel nickel consumption is projected to decline slightly. However, despite the ongoing, segmented contraction in supply, primary nickel inventory pressure continues to build. Moreover, the projected decline in electrolytic nickel production for June is not substantial. Therefore, inventory pressure remains the core issue, and production cuts have not yet translated into inventory reductions. Concurrently, recent declines in nickel ore prices have weakened overall cost support. Market focus is on Indonesian quotas and sulfur supply.
Alumina, Electrolytic Aluminum & Aluminum Alloy:
Overnight, alumina prices showed a slightly stronger trend, with the AO2609 contract closing at 2,825 yuan per tonne, up 0.68%. Open interest decreased by 5,843 lots to 297,000 lots. SHFE aluminum was weaker, with the AL2607 contract closing at 23,900 yuan per tonne overnight, down 0.67%. Open interest increased by 1,085 lots to 265,000 lots. Aluminum alloy prices were slightly firmer, with the main AD2608 contract closing at 22,995 yuan per tonne overnight, up 0.01%. Open interest rose by 111 lots to 15,437 lots. Spot prices for SMM alumina rose back to 2,690 yuan per tonne. The spot discount for aluminum ingots narrowed to 70 yuan per tonne. Foshan A00 aluminum was quoted at 23,850 yuan per tonne, at a 50 yuan per tonne discount to Wuxi A00. Processing fees for aluminum rods remained stable in most regions, with increases of 20-70 yuan per tonne in Baotou, Nanchang, and Wuxi. Processing fees for 1A60 aluminum rod held steady, while fees for 6-series and 8-series rods were stable, with low-carbon 6/8 series fees down 47 yuan per tonne. News of Guinea's impending policy implementation surfaced again during the day, prompting a market uptick. Debate continues over whether the final policy will involve mandatory quotas or excess penalties. Mines in Guinea are still observing and holding shipments. High freight rates are keeping CIF prices firm. New capacity in Guangxi is gradually starting production in June, while capacity under maintenance in northern China is set to return soon. Port inventories continue to accumulate, and insufficient profits from warehouse deliveries are limiting the ability to divert social inventory pressure. The market is still awaiting the final policy decision. Following the end of the peak demand season, domestic end-user orders face increasing pressure to contract, negatively impacting operating rates in the processing sector. The offsetting effect of export orders is also beginning to wane. Domestic aluminum ingot inventories have declined for two consecutive weeks, but absolute levels remain high, and the pace of destocking needs to accelerate. Macro uncertainties persist, with geopolitical risks from the fluctuating U.S.-Iran situation being repeatedly priced in. The high premium structure overseas is unlikely to converge quickly. Whether the aluminum ingot destocking cycle can exceed expectations will be a key variable for fundamentals.
Industrial Silicon & Polysilicon:
On the 9th, industrial silicon prices were weaker, with the main 2609 contract closing at 8,515 yuan per tonne, down 2.29% on the day. Open interest increased by 4,724 lots to 247,000 lots. The Baichuan spot reference price for industrial silicon was 9,186 yuan per tonne, down 10 yuan from the previous session. The price for the lowest deliverable grade fell to 8,600 yuan per tonne, with the spot premium expanding to 200 yuan per tonne. Polysilicon prices were also weaker, with the main 2606 contract closing at 34,280 yuan per tonne, down 3.55% on the day. Open interest rose by 909 lots to 105,000 lots. The adjusted standard for the lowest deliverable grade was lowered to 31,000 yuan per tonne, with the spot discount narrowing to 3,465 yuan per tonne. During the session, coking coal prices fell sharply, and hydropower-rich regions in Southwest China saw lower electricity prices, leading to a downward revision in the cost floor for industrial silicon. Currently, producers in Southwest China are accelerating the resumption of operations, and the price gap between high and low-grade material is gradually narrowing. Downstream, production cuts in organosilicon and the resumption of polysilicon production are offsetting each other, leading to a slight overall increase in restocking demand. The market is watching the pace of resumption in the Southwest, focusing on the incremental supply of spot material available for circulation excluding self-consumption. Entering mid-to-late June, expectations of polysilicon plant restarts and accumulating inventory are putting increasing pressure on the market, with spot prices expected to weaken further at the margin. Following the conclusion of the solar exhibition, the high volatility and premium in the futures market may gradually subside. Ongoing attention is on the announcement of the first-quarter verification results by the photovoltaic industry association and any subsequent related measures.
Lithium Carbonate:
Yesterday, the lithium carbonate futures 2609 contract rose 3.45% to 168,460 yuan per tonne. Spot prices remained stable: the average price for battery-grade lithium carbonate held at 163,750 yuan per tonne, industrial-grade at 159,750 yuan per tonne, and battery-grade lithium hydroxide (coarse particle) at 150,000 yuan per tonne. Warehouse receipt inventory decreased by 396 tonnes to 55,544 tonnes. On the supply side, weekly production increased by 797 tonnes week-on-week to 26,344 tonnes. June production is projected to increase by 2.6% month-on-month to 116,275 tonnes. Regarding demand, according to SMM data, June production of lithium iron phosphate is expected to increase 3% month-on-month to 504,150 tonnes, lithium cobalt oxide to rise 3% to 8,250 tonnes, while lithium manganese oxide output is forecast to drop 2% to 10,780 tonnes. Other institutional production schedules suggest cathode material output in June could increase 6.5% month-on-month, with battery cell production up 6.2%. Market statistics indicate global lithium-ion battery production is projected to rise 8.9% month-on-month. On inventories, large-sample inventories decreased by 1,240 tonnes week-on-week to 134,403 tonnes, while small-sample inventories fell by 630 tonnes to 98,786 tonnes. Using the large-sample measure, inventories in other segments dropped by 3,835 tonnes to 71,359 tonnes, while smelter inventories decreased by 316 tonnes to 16,615 tonnes. Weekly destocking continues. A notable decline in overseas lithium salt shipments could alleviate future supply pressure from imports. Yesterday saw a correlated rise in stocks and commodities, with futures prices rebounding. In the short term, if positive feedback between the basis and warehouse receipts is observed, further upward price correction is possible. However, caution is warranted as the restocking coefficient in downstream inventories has expanded again. If a one-sided market trend emerges, it could lead to a situation of high prices without actual transactions, potentially capping near-term gains. The market will then need to watch for new variables that could alter expectations, such as potential shipping disruptions from Zimbabwe, the possible resumption of the Jianxiawo mine, or the performance of demand growth rates.
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