Shares in the non-ferrous metals sector experienced a collective downturn. Ganfeng Lithium Co., Ltd (01772) fell 4.79% to HK$36.54, Aluminum Corporation of China Limited (02600) dropped 3.84% to HK$8.01, Jiangxi Copper Co., Ltd (00358) declined 3.65% to HK$33.82, and China Molybdenum Co., Ltd (03993) slid 3.33% to HK$16.28.
On the news front, the Federal Reserve is about to commence its two-day July Federal Open Market Committee (FOMC) meeting. Concurrently, the US-Iran conflict remains at a crossroads, facing potential escalation or de-escalation. According to a note from Oriental Securities, geopolitical tensions are likely to magnify volatility in the non-ferrous metals sector. The Fed's July meeting is expected to provide clearer guidance on its monetary policy path. However, given that precious metals prices have already corrected significantly, their actual downside could be limited until the Fed explicitly announces an interest rate hike.
Additionally, the restart of the Grasberg mine in Indonesia is expected to approach full capacity by the end of 2027. BOCI Research released a report stating that the Grasberg restart represents a medium-term supply pressure, which will release marginal incremental supply over the next 18 months. This is expected to weaken the narrative of a supply shortage, exerting a periodic downward pressure on copper prices. In contrast, the winter disruptions in Chile are seen as routine seasonal events. The Caserones mine's impact is limited, and the main northern mining areas remain unaffected. This is more of a short-term sentiment support than a structural shock. Overall, the report suggests that in the short term, copper prices will trade in a range supported by these disruptions, but their medium-term upside is constrained by the incremental supply from Grasberg.
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