Section 1: Copper: LME Inventory Declines Continually, Copper Prices Rally on Higher Ground
The macro environment reveals a growing contradiction between U.S. economic resilience and weakening employment. On the economic data front, the U.S. manufacturing sector continues its strong expansion, with the ISM Manufacturing PMI surging to 55.6, the highest since May 2022, showing broad-based improvements across production, new orders, exports, and employment indices. However, a turning point signal has emerged in the U.S. labor market, as Friday's July non-farm payrolls unexpectedly turned negative, losing 23,000 jobs, with a cumulative downward revision of 103,000 for May and June, primarily dragged down by the government and leisure & hospitality sectors. Although the unemployment rate fell to 4.2%, the decline in the labor force participation rate may be the main cause. The weakening non-farm data directly lowered rate hike expectations, leading to a decline in the U.S. dollar index and a broad drop in U.S. Treasury yields. On the Federal Reserve policy front, New York Fed President Williams clearly stated he would not hesitate to raise rates if inflation does not fall as expected; Daly noted that the impact of tariffs is waning, but tech investment has become a new inflation risk; and Musalem warned of the risk of high inflation becoming entrenched, suggesting that a second inflation scenario would require rate hikes. Internal divisions within the Fed have widened significantly, leading to high uncertainty regarding the policy path. On the geopolitical front, the U.S.-Iran standoff continues to progress toward negotiations, but the issue of the Strait of Hormuz navigation agreement has seen repeated back-and-forth. On the 4th, U.S. media reported that the U.S., Iran, and Oman are "close to reaching" a 60-day interim agreement; however, Iran emphasized that it is only negotiating with Oman and denies direct contact with the U.S.
On the fundamentals side, domestic TC (Treatment Charge) quotes for copper concentrate have fallen again, reaching historically extreme lows, indicating that the tightness in copper concentrate supply has never been alleviated and remains a strong support factor for the current fundamentals. In terms of refined copper production, the estimated output for August is 1.1392 million tons, up 1.1% month-on-month but down 2.76% year-on-year. Regarding imports, China's net imports of refined copper in June increased by 10.29% year-on-year to 284,600 tons, while the cumulative figure fell by 13.24% year-on-year; imports of copper scrap in June increased by 10.43% month-on-month to 210,900 metal tons, up 15.11% year-on-year, with a cumulative increase of 8.39% year-on-year. For inventory, as of August 7, global visible copper inventories decreased by 20,000 tons from the previous statistical period (July 31) to 1.029 million tons; LME inventories fell by 26,875 tons to 222,975 tons; Comex inventories increased by 6,045 tons to 655,748 tons; domestic social inventories of refined copper rose by 7,300 tons week-on-week to 119,200 tons, while bonded area inventories fell by 6,000 tons to 31,100 tons. On the demand side, downstream buyers are maintaining just-in-time procurement, with a weak willingness to stockpile at high prices.
In terms of outlook, changes in copper supply and inventory are the main drivers of the current price rally, or rather, fundamentals play a slightly larger role alongside capital flows. Fundamentals are reflected in two aspects: first, TC fees failed to stop falling in August, further declining to -$173.91 per ton; second, global visible inventories have been declining rapidly in succession, especially the unusual drop in LME copper inventories recently, while domestic social inventories have once again fallen to historical lows. More critically, the price premium of U.S. copper over LME persists, meaning that U.S. copper is continuously absorbing overseas copper. This could leave the copper market in non-U.S. regions in a state of extreme shortage. Driven by capital flows (increases in open interest both domestically and abroad), copper prices are likely to remain strong in the short term, with attention focused on how LME prices perform near historical highs. The risk lies in the U.S. tariff policy on refined copper. If the tariff expectation holds, copper prices will likely surge further; if no tariffs are imposed, the downside risk is significant.
Section 2: Nickel & Stainless Steel: Quota Disturbances Continue to Create Volatility
On the supply side, the weekly premium for 1.6% nickel ore fell by $1.5 per wet ton to $1.5 per wet ton week-on-week; the ex-factory price for 1.2% nickel ore decreased by $1 per wet ton to $28 per wet ton, while the 1.6% grade remained flat at $64.9 per wet ton. For the first HPM period of August, 1.2% and 1.6% nickel ore prices rose by $0.23 per ton and $0.35 per ton, respectively. Refined nickel production in August is expected to decrease by 1.6% month-on-month to 31,400 tons; domestic nickel pig iron (NPI) production is expected to increase by 6% month-on-month to 32,000 nickel tons, while Indonesian NPI production is expected to increase by 4% month-on-month to 135,300 nickel tons. Nickel sulfate production is expected to rise by 8% month-on-month to 38,595 nickel tons. The discount coefficient for MHP (Mixed Hydroxide Precipitate) weakened, and the weekly average spot price fell slightly; production in July increased by 16.4% month-on-month to 34,800 nickel tons. The discount coefficient for high-grade nickel matte remained stable, and the weekly average spot price also fell slightly; production in July decreased by 14.6% month-on-month to 24,500 nickel tons.
On the demand side, in the new energy sector, weekly ternary material production increased by 688 tons to 20,365 tons, and weekly inventories increased by 623 tons to 21,090 tons. In August, ternary precursor production is expected to increase by 2% month-on-month to 97,370 tons, ternary material production is expected to increase by 5% month-on-month to 93,840 tons, and lithium battery production is expected to increase by 7% month-on-month to 288.9 GWh, with ternary battery production increasing by 8% month-on-month. In terms of end-use, data from the China Passenger Car Association (CPCA) indicated that wholesale sales of new energy passenger vehicles in July are expected to reach 1.47 million units. For stainless steel, total social inventory at 89 major warehouses across the country was 1.087 million tons, a week-on-week decrease of 1.39%, with 300-series inventory decreasing by 14,474 tons to 656,000 tons. According to Mysteel, the estimated crude steel output for 43 domestic stainless steel mills in August 2026 is 3.6388 million tons, a month-on-month increase of 2.22% and a year-on-year increase of 9.75%. This includes 1.0503 million tons for the 200 series (up 1.45% MoM, up 4.27% YoY), 1.8982 million tons for the 300 series (up 3.9% MoM, up 9.22% YoY), and 690,300 tons for the 400 series (down 1.05% MoM, up 21.02% YoY).
On the inventory front, LME inventories decreased by 1,728 tons to 264,444 tons for the week; SHFE nickel inventories increased by 1,277 tons to 113,251 tons; social inventories increased by 2,039 tons to 133,478 tons; and bonded area inventories decreased by 300 tons to 1,400 tons.
The market was primarily driven by repeated disturbances related to quota news this week. On August 3, Indonesia's Minister of Energy and Mineral Resources, Bahlil Lahadalia, emphasized that the ministry is gradually easing RKAB (Work Plan and Budget for Mining) quotas but declined to provide details. On August 6, the market circulated news that one of Indonesia's largest nickel ore suppliers, PT Weda Bay Nickel, had been approved for an additional ~25 million wet tons of nickel ore RKAB quota for the second half of 2026. According to Mysteel research, the project has essentially been approved for supplementary nickel ore quotas for the second half of the year, but no official document has been issued to WBN yet. Subsequently, on August 7, the Director General of Minerals stated that WBN had indeed submitted an application for a 25-million-ton supplement to the Ministry of Energy and Mineral Resources, but an application is not equivalent to approval. As of August 6, no approval had been granted. Companies can freely submit large incremental applications, but Indonesia insists on controlling mineral resources and will not arbitrarily approve large-scale quota expansions. The online news prematurely characterizing the quota as "approved" is considered a false rumor. For August production schedules, primary nickel is expected to decrease slightly month-on-month, while domestic and international NPI and nickel sulfate production are expected to increase month-on-month. On the demand side, production schedules for new energy and stainless steel are both expected to increase month-on-month. Overseas inventories continue to decline, while domestic weekly inventories show a slight accumulation. Quota risks constrain the upside potential for prices, and attention should be paid to the quota volumes of other companies and macro sentiment.
Section 3: Aluminum: Sentiment Improves, Destocking Slows
Alumina futures traded with a firm bias during the week, with the main contract closing at 2,699 yuan per ton on the 7th, a weekly increase of 3%. Aluminum futures also showed a firm bias, closing at 24,040 yuan per ton for the week, up 1.7%. Aluminum alloy futures were firm, closing at 23,550 yuan per ton for the week, a weekly gain of 1.44%. On the supply side, according to SMM, the alumina operating rate increased by 0.5% to 74.74%, with weekly production increasing by 100 tons to 1.697 million tons. Maintenance at plants in Guizhou and Henan has continued to recover. Overseas, the Al Taweelah alumina refinery operated by EGA continues to ramp up production. For electrolytic aluminum, the operating rate rose by 0.04% to 98.54%, with weekly production increasing by 400 tons to 874,800 tons. The weekly molten aluminum ratio increased by 0.19% to 78.37%.
On the demand side, as the transition between the slow and peak seasons approaches, the pace of processing capacity adjustments has slowed. The average operating rate for processing enterprises fell by 0.1% to 60.1% for the week. By segment, the operating rate for aluminum sheet/plate remained stable at 69%, aluminum foil fell by 0.5% to 70.1%, aluminum profiles fell by 0.4% to 51.6%, and aluminum wire/cable remained stable at 62%. The operating rate for recycled aluminum alloys remained stable at 49.4%. For aluminum rod processing fees, Henan and Linyi remained stable, Baotou rose by 30 yuan per ton, while Wuxi, Xinjiang, and Guangdong fell by 60-70 yuan per ton. Aluminum rod processing fees fell across the board by 50-150 yuan per ton.
On the inventory front, exchange inventories for alumina increased by 2,714 tons to 143,000 tons for the week; SHFE aluminum inventories fell by 13,000 tons to 455,700 tons; and LME aluminum inventories fell by 6,250 tons to 256,400 tons. For social inventories, alumina port inventories increased by 47,000 tons to 960,000 tons; aluminum ingot social inventories fell by 20,000 tons to 933,000 tons; and aluminum rod social inventories increased by 4,000 tons to 123,500 tons.
The outlook suggests that both domestic and overseas production restarts and new capacity are ramping up simultaneously, import arrivals remain at high levels, and social and exchange inventories are still accumulating. As the long-term contract price for Guinea ore has risen, and coal prices in Shanxi have rebounded due to supply disruptions, the cost center for alumina is moving higher. Coupled with raw material stocking by newly started electrolytic aluminum projects, inland aluminum smelters are increasing their receipt of Southwest alumina. Spot prices have not followed the futures rally, and the market appears to be bottoming out. In the electrolytic aluminum sector, signals of a ceasefire from Trump have improved macro risk appetite, leading to a recovery in non-ferrous metals. Both domestic and overseas inventories are decreasing, but the destocking slope is slowing. In the short term, geopolitical premiums face two-way pulls, and aluminum prices are likely to remain range-bound. Key focus will be on the strength of downstream pre-holiday stocking in mid-August, with vigilance required for LME squeeze risks and macro sentiment volatility.
Section 4: Industrial Silicon & Polysilicon: Expectations Rise, Reality Remains Under Pressure
Industrial silicon futures traded with a firm bias during the week, with the main contract 2609 closing at 8,550 yuan per ton on the 7th, a weekly gain of 4.65%. Polysilicon prices moved higher, with the main contract 2609 closing at 37,040 yuan per ton, a weekly increase of 12.11%. Spot prices were stable across the board, with off-grade 553 (no oxygen blowing) stable at 8,800 yuan per ton, grade 553 (with oxygen blowing) stable at 9,000 yuan per ton, and grade 421 stable at 9,400 yuan per ton.
On the supply side, according to Baichuan, weekly industrial silicon production fell by 3,240 tons to 82,300 tons, and the weekly furnace operating rate was cut by 2.2% to 31.4%. The number of operating furnaces decreased by 17 to 226 for the week. In the Northwest region, a total of 143 silicon furnaces were in operation, with Xinjiang starting one new furnace, Gansu shutting down 10, and Ningxia shutting down 2. In the Southwest region, a total of 66 silicon furnaces were in operation, with Sichuan shutting down 3 furnaces. In other regions, a total of 17 silicon furnaces were in operation, with Inner Mongolia shutting down 2 and Hunan shutting down 1 furnace.
On the demand side, spot prices for N-type polysilicon remained stable at 31,500 yuan per ton for the week, while N-type mixed-grade material remained stable at 30,000 yuan per ton. Silicon material producers have stopped quoting and are waiting to see the market, with the market awaiting further policy implementation and industry requirements. Both downstream silicon wafer prices and production schedules have increased slightly, but there is no significant increase in upstream procurement. Weekly organic silicon prices were raised to the range of 12,500-13,500 yuan per ton. Monomer plants have raised prices and limited production according to meeting requirements. Downstream buyers are consuming previously low-priced stocks, and new orders are mainly small-lot transactions. Weekly polysilicon production increased by 850 tons to 25,300 tons, while DMC production fell by 3,200 tons to 39,700 tons.
On the inventory front, exchange inventories for industrial silicon increased by 4,085 tons to 165,500 tons for the week, while polysilicon inventories increased by 2,000 tons to 64,400 tons. For social inventories, industrial silicon inventories decreased by 1,600 tons to 522,600 tons, with plant inventories decreasing by 3,600 tons to 313,100 tons. Huangpu port inventories remained stable at 65,000 tons, Tianjin port inventories increased by 2,000 tons to 88,000 tons, and Kunming port inventories remained stable at 56,500 tons. Polysilicon plant inventories increased by 5,900 tons to 289,000 tons for the week.
The outlook suggests that large-scale furnace shutdowns have occurred in Inner Mongolia, Gansu, and Sichuan. However, under weak demand, destocking efforts at plants have limited effectiveness. In the short term, industrial silicon is trading in a range, waiting for a recovery in downstream demand during the peak season. The current market focus is on dynamics in the polysilicon industry. On one hand, Trump has announced tariffs on polysilicon and its derivative products. On the other hand, the State Administration for Market Regulation has initiated guidance on pricing compliance in the photovoltaic industry. Eight major polysilicon companies have jointly signed a proposal strictly adhering to energy consumption standards and refusing to sell below cost. The fundamental divergence persists, with no significant increase in terminal production schedules in August and no substantial destocking of industry inventories. In the short term, polysilicon is in a rhythm of verifying or disproving various news, with market sentiment repeatedly seesawing. The risk of high volatility remains, and caution is advised.
Section 5: Lithium Carbonate: Destocking Does Not Imply Scarcity, Focus on Spot Market Support
On the supply side, weekly production increased by 130 tons to 22,971 tons. Lithium mica-based lithium extraction fell by 62 tons to 11,713 tons, lepidolite-based extraction fell by 8 tons to 2,397 tons, salt lake-based extraction increased by 260 tons to 5,656 tons, and recycling-based extraction fell by 60 tons to 3,205 tons. Lithium carbonate production in August is expected to increase by 7% month-on-month to 112,000 tons, with spodumene-based production increasing by 6,263 tons, lepidolite-based production increasing by 2,000 tons, salt lake-based production decreasing by 1,750 tons, and recycling-based production increasing by 880 tons.
On the demand side, weekly ternary material production increased by 688 tons to 20,365 tons, and weekly inventories increased by 623 tons to 21,090 tons. Weekly lithium iron phosphate (LFP) production increased by 688 tons to 20,365 tons, and weekly inventories increased by 623 tons to 21,090 tons. In August, ternary material production is expected to increase by 5% month-on-month to 93,840 tons, LFP production is expected to increase by 5% month-on-month to 565,100 tons, and lithium battery production is expected to increase by 7% month-on-month to 288.9 GWh. This includes an 8% month-on-month increase for ternary batteries, a 7% increase for LFP batteries, and an 8% decrease for other types of batteries. On the vehicle side, data from the China Passenger Car Association (CPCA) indicates that wholesale sales of new energy passenger vehicles in July are expected to reach 1.47 million units.
On the inventory front, large-sample weekly inventories fell by 6,773 tons to 101,104 tons, and small-sample inventories fell by 4,177 tons to 79,410 tons. According to the large-sample data, inventories in other links fell by 4,017 tons to 42,025 tons, smelter inventories increased by 1,298 tons to 15,640 tons, and downstream inventories decreased by 4,054 tons to 43,439 tons.
The outlook suggests that weekly apparent data has strengthened, and the strong reality is undeniable. However, it is necessary to distinguish between destocking and scarcity. Although the overall inventory turnover days continue to decline, the spot market does not appear tight, making it difficult to create a positive feedback loop for prices. Therefore, while there may be a reasonable time window for long positions due to improved market sentiment, the overall upside potential for any rebound is likely limited without better positive feedback from demand. Furthermore, the issue with the bearish long-term outlook is that this part cannot be easily falsified, especially given the continuous accumulation of inventories in the battery sector without corresponding installation growth this year, which will further add pressure. From a macro sentiment perspective, the correlation and lag between lithium mining stocks and commodity prices are evident, and this is an important indicator to continue tracking. More importantly, it may reflect whether the bearish view on the long-term outlook has weakened.
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