Copper prices exhibited a firming trend overnight in both domestic and international markets, while the import arbitrage window for refined copper in China remained closed with widening losses.
On the macroeconomic front, the number of initial jobless claims in the United States for the previous week rose to 225,000, exceeding the expected 215,000 and marking the highest level in nearly three months. However, continuing claims remain low, indicating the overall labor market has not deteriorated significantly, with the market awaiting further guidance from the upcoming non-farm payrolls data. Federal Reserve officials have indicated that the current choice is between maintaining patience and raising interest rates, with inflation cited as the primary economic risk. Geopolitically, media reports suggest former President Trump stated he has no intention of restarting a full-scale war with Iran.
Regarding inventories, LME copper stocks decreased by 2,575 tonnes to 379,975 tonnes, while Comex copper stocks increased by 494 tonnes to 583,061 tonnes. SHFE copper warehouse receipts fell by 536 tonnes to 95,855 tonnes, and BC copper warehouse receipts held steady at 10,806 tonnes. On the demand side, purchasing activity saw a slight uptick as copper prices weakened. The recurring nature of US-Iran tensions continues to inject volatility into copper's upward trajectory. Current information suggests that even if US-Iran negotiations progress, the issue of navigation through the Strait of Hormuz remains difficult to resolve effectively, implying that overseas sulfur shortages may persist as a supply-side disruption factor. Additionally, the high premium of US copper relative to LME copper is prompting the transfer of overseas copper to the US for arbitrage, which continues to alleviate LME inventory pressure. Overall, the short-term outlook for copper prices remains cautiously bullish, though expectations should be moderated with attention to trading timing.
Nickel and Stainless Steel
Overnight, LME nickel declined by 0.98% to $18,635 per tonne, while SHFE nickel fell by 1.25% to 139,040 yuan per tonne. Inventory data shows LME nickel stocks remained at 274,236 tonnes, while SHFE warehouse receipts increased by 941 tonnes to 85,496 tonnes. In terms of premiums, the LME cash-to-3-months spread remained in negative territory, and the import nickel premium in China decreased by 100 yuan per tonne to -450 yuan per tonne.
Supply is showing signs of proactive tightening. On one hand, an Indonesian mine has entered a maintenance phase due to quota issues; based on policy expectations, some additional quota volumes may be released in the second half of the year. On the other hand, following the previous policy adjustment to HPM, nickel ore and sulfur prices have led to reduced operational loads at some Indonesian projects. Looking at June demand schedules, ternary material production is expected to remain flat month-on-month, while stainless steel's nickel consumption is projected to decline slightly.
However, primary nickel inventory pressure continues to build, and the planned reduction in June's electrolytic nickel output is not substantial. Therefore, inventory pressure remains the core issue, as production cuts have yet to be reflected in inventory data. Against a backdrop of policy support, proactive supply tightening, and high inventories, the market is expected to continue trading within a range. Caution is advised regarding potential market sentiment shifts, with attention on quota developments in the latter half of the year.
Alumina, Primary Aluminium, and Aluminium Alloy
Overnight, alumina prices showed a weak trend, with the AO2609 contract closing at 2,752 yuan per tonne, down 1.36%, and open interest increasing by 7,465 lots to 329,000 lots. Primary aluminium prices also weakened, with the AL2607 contract closing at 24,310 yuan per tonne, down 0.29%, and open interest rising by 1,426 lots to 276,000 lots. Aluminium alloy prices were similarly weak, with the main AD2607 contract closing at 23,120 yuan per tonne, down 0.04%.
In the physical market, the SMM alumina price rebounded to 2,682 yuan per tonne. The discount for aluminium ingots widened to 110 yuan per tonne. Foshan A00 aluminium was quoted at 24,130 yuan per tonne, at a 70 yuan per tonne discount to Wuxi A00. Aluminium billet processing fees remained stable in Baotou, Henan, and Linyi, while fees in Xinjiang, Nanchang, Guangdong, and Wuxi increased by 40-100 yuan per tonne.
The release of new alumina production capacity, coupled with ongoing concentrated arrivals of imports, continues, while smelter pickup rates remain slow, potentially accelerating inventory accumulation and creating fundamental pressure on alumina. During the current uncertain period regarding Guinea's quota policy, initiating left-side trades carries high risk. It is prudent to wait for policy clarity and subsequent opportunities to establish short positions following a reassessment of expectations.
The US-Iran situation has become volatile again, with Iran indicating plans to completely block the Strait of Hormuz, leading the market to reprice geopolitical risk premiums. In June, there are dynamics of production resumption in Yunnan, while downstream demand is transitioning seasonally from peak to off-peak, with only resilience provided by battery cell and export demand increments. As domestic and international inventory trends converge, there is room for a slight narrowing of the price spread. Whether aluminium prices can sustain further gains depends on whether macro sentiment releases signals of recovery and whether supply-side narratives of production restrictions gain traction, while also monitoring destocking speed during the off-season and changes in the overseas geopolitical situation.
Industrial Silicon and Polysilicon
On the 4th, industrial silicon prices weakened, with the main 2609 contract closing at 8,715 yuan per tonne, down 0.17% on the day, and open interest decreasing by 4,526 lots to 261,400 lots. The Baichuan spot reference price for industrial silicon was 9,196 yuan per tonne, unchanged from the previous session. The price for the lowest deliverable grade fell to 8,600 yuan per tonne, shifting the spot market from a premium to a 50 yuan per tonne discount.
Polysilicon prices also weakened, with the main 2606 contract closing at 35,515 yuan per tonne, down 3.87% on the day, and open interest increasing by 2,909 lots to 104,300 lots. After adjustments, the standard for the lowest deliverable grade was lowered to 31,000 yuan per tonne, with the spot discount narrowing to 4,515 yuan per tonne.
Rising prices for silicon coal and petroleum coke, linked to coking coal, have increased industrial silicon production costs, leading to postponed production restarts by some southwestern producers originally planned for late May. However, subsequent reductions in southwestern electricity tariffs are expected to offset some cost pressure. As inventories shift from producers to traders and continue to accumulate, the dual pressure of high warehouse receipts and social stocks is capping upside potential, while support is found near the full production cost line in the southwest.
In mid-June, leading polysilicon enterprises are scheduled to resume feedstock operations, making supply pressure fully apparent. Insufficient bulk stockpiling from end-users, combined with market pressure from hedging activities and high inventory realities, is constraining the futures market. Following the concentrated cancellation of May contract warehouse receipts, selling pressure from silicon producers and futures traders may exert significant pressure on the June contract, making it difficult for polysilicon producers to sustain previous price-support strategies. Recent photovoltaic exhibitions have not yielded new supply-demand dynamics, and the polysilicon market is showing a trend of correction following unmet expectations. It is prudent to await further developments and remain vigilant against high volatility in the futures market due to market rumors and news fluctuations.
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