Copper: Geopolitical Turmoil Weighs on Prices
Macroeconomic data from the US remains robust. Initial jobless claims for the week ending July 18 fell sharply to 187,000, the lowest level since September 1969, significantly below the market consensus of 212,000. Continuing claims also dropped to 1.796 million, a six-week low. The S&P Global US Composite PMI for July rose to 53.6, an eight-month high, with the Services PMI at 53.6, well above the expected 51.5. However, the Manufacturing PMI eased slightly to 53.8 from 53.9. The Federal Reserve has entered its pre-meeting blackout period, with interest rate swaps pricing in a roughly 30% probability of a rate hike in July and a 70% chance of a hold. Arguments for a hike are supported by rising oil prices fueling inflation concerns and lingering core inflation pressures, while arguments for a pause are based on the moderate June CPI/PPI data and the absence of significant overheating in employment. On the geopolitical front, the US-Iran conflict is on the verge of a full-scale outbreak. The US has been striking Iranian military positions on the Strait of Hormuz coast for several days. President Trump's rhetoric is intensifying, reportedly telling US media he is "close" to deciding on a "large-scale attack" on Iran, potentially exceeding the scale of military operations in late February, though he emphasized no final decision has been made.
On the fundamentals front, domestic TC (Treatment Charge) for copper concentrate has fallen again, reaching historically extreme lows, indicating persistent tightness in copper concentrate supply, which remains a strong support factor. For refined copper, estimated July output is 1.1661 million tons, up 1.8% month-on-month but down 0.7% year-on-year. Net imports of refined copper in June rose 10.29% year-on-year to 284,600 tons, while cumulative imports fell 13.24%. Copper scrap imports in June increased 10.43% month-on-month and 15.11% year-on-year. As of July 24, global visible copper inventories fell by 25,000 tons from the previous week to 1.064 million tons, with LME stocks down 19,850 tons and Comex stocks up 10,478 tons. Domestic refined copper social inventories fell by 14,200 tons to 109,200 tons, and bonded zone stocks decreased by 1,700 tons to 37,200 tons. Downstream demand remains for rigid procurement, with weak willingness to build high-priced inventories.
In summary, recent macro disturbances and fundamental support coexist. The persistent decline in TC and accelerated destocking domestically and internationally provide strong support for copper prices. However, hawkish Fed expectations and frequent geopolitical disturbances in the Middle East create macro headwinds. Additionally, frequent fluctuations in overseas financial markets are also deeply influencing copper price trends. Overall, while the copper price center has edged higher, it has not effectively broken out of its trading range, and caution is warranted. Next week brings the FOMC decision, US Q2 GDP, and June PCE data. The inflation transmission effect from surging oil prices is a major variable. If PCE exceeds expectations or the Fed signals a hawkish stance, the dollar could strengthen further, suppressing copper prices. Conversely, if the Fed acknowledges weakening economic data and maintains a neutral tone, macro pressure could ease marginally. Regarding geopolitics, while Trump's maximum pressure rhetoric triggers risk aversion, markets also worry that Trump might ultimately back down.
Nickel & Stainless Steel: Inventories Decline, Prices Firm
On the supply side, the weekly premium for 1.6% nickel ore remained flat, while the price of 1.2% nickel ore delivered to the plant fell by $0.5/wet ton to $29/wet ton. The July HPM prices for 1.2% and 1.6% nickel ore decreased by $2.15/ton and $3.58/ton, respectively. Import/export data for June showed refined nickel imports down 15% month-on-month to 25,691 tons, while exports jumped 175% to 1,811 tons. Nickel pig iron imports fell 16% to 88,798 nickel tons. MHP imports declined 18% to 104,200 nickel tons. Nickel sulfate imports increased 57% to 29,817 tons. On the demand side, in the new energy sector, June exports of NCM precursors rose 69% to 5,497 tons. NCM cathode materials exports fell 1% to 13,873 tons, while imports rose 19% to 8,428 tons. Lithium battery exports increased 24% to 36.2 GWh, with NCM batteries up 1% to 11.5 GWh. According to the CPCA, total passenger car sales in July are estimated at 1.52 million units, with new energy retail sales around 980,000 units, pushing the penetration rate to an estimated 64.5%. For stainless steel, total social inventory across 89 major warehouses stood at 1.099 million tons, up 0.93% week-on-week, with 300 series inventory up 3,821 tons to 672,000 tons. June stainless steel imports rose 32% month-on-month to 120,000 tons, while exports fell 10% to 446,000 tons. Inventory levels saw LME stocks decrease by 6,942 tons to 267,342 tons, SHFE stocks fall by 83 tons to 110,092 tons, and social inventories increase by 1,794 tons to 129,798 tons.
Regarding policy, on July 10, Tri Winarno, Director General of Minerals and Coal at Indonesia's Ministry of Energy and Mineral Resources, stated definitively that the 2026 nickel ore RKAB quota will not be significantly increased, and any adjustments will only focus on meeting the needs of smelters currently lacking ore supply. The APNI recorded that ore absorption from January to June 2026 reached 120.6 million tons, or 46.2% of the 2026 RKAB production quota of 260-270 million tons. On the news front, due to new customs inspections for radiological substances on rare earths and uranium, some metal product exports have been delayed. Sources indicate that multiple shipments have been held up this month as Indonesian customs require additional testing for certain key minerals. Recent continuous declines in warehouse inventories have supported nickel prices, which remain firm. Focus will be on future quota releases and whether demand can further drive destocking, potentially creating a new catalyst for nickel prices.
Aluminum: Destocking Slows, Caution Advised
Alumina futures were firmer, with the main contract closing at 2,710 yuan/ton, up 2% for the week. SHFE aluminum was also stronger, with the main contract closing at 23,225 yuan/ton, up 0.2%. Aluminum alloy weakened slightly, with the main contract at 23,005 yuan/ton, down 0.1% for the week.
On the supply side, alumina operating rates remained steady at 75.04%, with weekly output stable at 1.704 million tons. Operations in Guizhou and Henan are resuming after maintenance. Overseas, the EGA Al Taweelah alumina refinery has officially announced a restart, with capacity now at 50% and full production expected soon. For electrolytic aluminum, operating rates edged down 0.04% to 98.55%, with weekly output falling 400 tons to 874,800 tons. The proportion of molten aluminum rose 0.25% to 78.38%.
Demand continues to weaken seasonally, with processing sector operating rates declining. The average operating rate for downstream processors fell 0.3% to 61.1%. Aluminum plate/sheet and foil sectors held steady, while wire/cable, profile, and recycled aluminum alloy sectors saw declines. Processing fees for aluminum rods and bars were mixed. Inventory data showed LME aluminum stocks down 7,000 tons, SHFE stocks down 21,200 tons, and social inventories of aluminum ingots falling 18,000 tons to 1.006 million tons. Alumina social inventories increased by 55,000 tons to 834,000 tons.
In summary, the release of new alumina capacity alongside the resumption of maintenance capacity is increasing inventory pressure. Spot prices continue to decline, and the futures price has broken below the cost line, providing support. Domestic bauxite policy implementation is firming imported ore prices, setting the stage for a low-level tug-of-war in alumina. For electrolytic aluminum, escalating Middle East tensions are adding a geopolitical risk premium. Domestic destocking trends provide support, but risks persist. The strong US jobs data has led to renewed pricing of rate hikes, tightening liquidity, while the pace of destocking has also slowed. Short-term aluminum prices are likely to remain range-bound amid conflicting factors. Key focus will be on the escalation of Middle East tensions and the sustainability of downstream restocking.
Industrial Silicon & Polysilicon: Supply Shrinks, Narrow Recovery
Industrial silicon futures were weaker, with the main 2609 contract closing at 8,295 yuan/ton, down 0.3% for the week. Polysilicon was also weaker, with the main 2609 contract at 33,365 yuan/ton, down 1.82%. Spot prices were mixed, with some grades stable and others declining. Weekly industrial silicon production fell by 1,440 tons to 85,710 tons, with the operating rate declining. The number of furnaces in operation decreased by 8 to 247. Northwest producers saw 5 furnaces shut down in Xinjiang, while 2 were shut down in Sichuan. On the demand side, polysilicon prices were stable. Market transactions remain negotiated on a case-by-case basis, with downstream silicon wafer restocking insufficient. Quotes are hovering near cost support. Organosilicon prices fell by 1,000 yuan/ton. The industry meeting's latest production limit was raised to 60%, but some individual enterprises are restarting operations. Polysilicon output increased by 400 tons to 24,320 tons, while DMC output rose by 2,700 tons to 39,900 tons. Inventories of industrial silicon increased by 1,545 tons to 162,000 tons (exchange) and by 12,700 tons to 490,200 tons (social). Polysilicon inventories increased by 3,200 tons to 58,000 tons (exchange) and by 8,600 tons to 301,600 tons (factory).
In summary, maintenance activities by some industrial silicon producers in the northwest, along with reported shutdowns at a major Sichuan plant, have provided a temporary boost to the futures market. However, this is capped by high inventory levels and weak demand. The scale and duration of the maintenance are likely limited in their price-supporting effect, suggesting a narrow recovery. For polysilicon, the resumption of production by leading enterprises is gradually adding volume, concentrating inventory pressure on silicon material factories and traders. The market has largely priced in the energy consumption quota at the sentiment level, and recent industry meetings have not provided any new signals. Short-term polysilicon is expected to continue its range-bound consolidation. Focus will be on the actual duration of industrial silicon maintenance in the northwest and any new signals regarding polysilicon energy consumption policies.
Lithium Carbonate: Stabilization Emerging, But Caution Remains
On the supply side, weekly production fell by 680 tons to 23,868 tons, with declines in lepidolite and recycled lithium, while spodumene and salt lake brine-based output increased slightly. June import/export data showed lithium concentrate imports up 1% month-on-month to 555,000 tons. Lithium carbonate imports fell 31% to 11,695 tons, with imports from Chile down 35% and Argentina down 26%. Lithium hydroxide imports rose 12% to 4,400 tons, while exports surged 70% to 6,018 tons. Lithium hexafluorophosphate exports fell 26% to 1,104 tons. On the demand side, weekly NCM cathode material production fell by 451 tons to 19,474 tons, while LFP production rose by 930 tons to 120,930 tons. June export data showed NCM precursors up 69%, LFP exports up 102%, and lithium battery exports up 24% (including 27% for power batteries and 16% for storage batteries). According to the CPCA, preliminary estimates suggest total passenger car sales in July will be around 1.52 million units, with new energy vehicle retail sales reaching about 980,000 units, implying a penetration rate of 64.5%. Data from DADT think tank showed the cell price range for energy storage projects bid this week was stable at 0.37-0.42 yuan/Wh. Inventory levels, based on a large sample, showed a decline of 5,341 tons to 114,326 tons, with decreases across most segments.
In summary, the core contradiction in the lithium carbonate market remains the "strong reality, weak expectations" dynamic, which is the main theme of ongoing market competition. With the distant loose supply expectation still un-falsifiable, the market saw a decline with increased open interest earlier this week, a feature reflected in both absolute prices and the term structure. From a "strong reality" perspective, spot basis has firmed, with some sellers showing reluctance to sell. The raw material market is also tight. On the supply side, the restart of Jiangxi lithium mines may be slower than expected, and delayed shipments from Zimbabwe have led to production cuts at some lithium salt plants. Additionally, some plants have announced maintenance plans, effectively reducing output. On the demand side, despite concerns about the future, near-term fundamentals remain supportive. According to DADT's monthly survey of 37 major battery companies and supply chains, total Chinese lithium battery production (storage, power, consumer) in August is estimated at 304 GWh, up 7.4% month-on-month. On the inventory front, the monthly balance sheet suggests continued destocking, maintaining a rapid pace for now. Recent stabilization in lithium mining stocks and the halt in the sharp decline of lithium carbonate futures suggest that the concentrated short-selling sentiment is being absorbed. Market logic may be shifting from pricing distant weak expectations to pricing near-term strong reality. However, continued monitoring is needed to see if spot prices can form an effective positive feedback loop and to identify opportunities from various marginal catalysts.
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