Copper prices experienced a surge followed by a retreat overnight, with the import arbitrage window for domestic physical refined copper closing. On the geopolitical front, the US May CPI rose 4.2% year-on-year, hitting a three-year high but aligning with market expectations. The core CPI accelerated to 2.9% year-on-year, matching forecasts, while the month-on-month increase slowed to 0.2%, slightly below expectations. The CPI data did not fully alleviate market concerns, instead fueling further bets on interest rate hikes. Additionally, tensions in the Middle East escalated as former US President Trump expressed dissatisfaction with the slow progress of US-Iran negotiations, threatening "very heavy" attacks on Iranian infrastructure, while Iran warned of a stronger response. This heightened conflict expectations renewed market worries. Inventory-wise, LME copper stocks fell by 3,075 tonnes to 369,575 tonnes, while Comex copper inventories increased by 981 tonnes to 588,626 tonnes. SHFE copper warehouse receipts rose by 544 tonnes to 96,087 tonnes, and BC copper receipts increased by 100 tonnes to 13,133 tonnes. On the demand side, volatile copper prices have led downstream buyers to adopt a more cautious purchasing stance. Both the potential escalation of US-Iran tensions and rising Fed rate hike expectations are exerting pressure on precious metals and nonferrous markets, with macro headwinds likely to persist, posing continued downside risks for copper. Investors are watching for potential "buy the rumor, sell the fact" price reversals around the upcoming Fed policy meeting. Fundamentally, expectations of tightening supply continue to support bullish sentiment, but anticipation of a seasonal demand slowdown is also growing. Overall, a cautious approach is warranted in the near term.
Key Metals Overview
Nickel & Stainless Steel
LME nickel fell 1.47% overnight to $17,730 per tonne, while SHFE nickel declined 0.72% to 134,410 yuan per tonne. LME nickel inventories decreased by 138 tonnes to 274,710 tonnes, and SHFE warehouse receipts increased by 1,774 tonnes to 91,132 tonnes. The LME cash-to-3-months spread remained in contango, while the import premium for nickel rose 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 actively tightening, partly due to maintenance at an Indonesian mine related to quota issues, with potential for additional quota allocations in the second half of the year. Additionally, adjustments to HPM reference prices have led to reduced operations at some Indonesian projects due to costs for nickel ore and sulfur. Demand projections for June show flat month-on-month production for ternary cathode materials and a slight decline in nickel consumption for stainless steel. Despite ongoing, segment-specific supply tightening, primary nickel inventory pressure continues to build. June's planned electrolytic nickel production cuts are not substantial, keeping inventory pressure the core issue, as supply reductions have yet to materialize in stockpile data. Recent declines in nickel ore prices have also weakened overall cost support. Market focus remains on Indonesian quotas and sulfur supply.
Alumina, Primary Aluminum & Aluminum Alloy
Alumina futures traded stronger overnight, with the AO2609 contract closing at 2,889 yuan per tonne, up 0.73%, and open interest increasing by 246 lots to 286,000 lots. Primary aluminum futures also edged higher, with the AL2607 contract settling at 23,940 yuan per tonne, up 0.02%, though open interest decreased by 3,519 lots to 257,000 lots. Aluminum alloy futures gained, with the main AD2608 contract closing at 23,190 yuan per tonne, up 0.63%, and open interest rising by 121 lots to 15,592 lots. Spot SMM alumina price rebounded to 2,692 yuan per tonne. The spot premium for aluminum ingots narrowed to 50 yuan per tonne. Foshan A00 aluminum price retreated to 23,750 yuan per tonne, at a 50 yuan discount to Wuxi A00. Aluminum billet processing fees held steady in Linyi and Nanchang but increased by 20-250 yuan per tonne in Xinjian, Baotou, Wuxi, and Guangdong. Processing fees for aluminum rod series 1A60 and 6/8 series remained stable, while low-carbon 6/8 series fees fell by 99 yuan per tonne. Frequent news about the impending finalization of Guinea's mining policy and production curbs at Shanxi alumina plants due to environmental controls on red mud have supported futures prices. Debate continues over whether the final policy will involve mandatory quotas or excess production fines. Guinean mines remain cautious with shipments, while high freight rates keep CIF prices firm. New capacity in Guangxi is starting commissioning in June, and idled capacity in the north is set to resume. Port inventories continue to accumulate, with insufficient delivery arbitrage failing to alleviate social stock pressure, leaving the market awaiting the final policy details. Post-peak season, domestic end-user orders face accelerated contraction, negatively impacting processor operating rates, while the offsetting effect of export orders is also weakening. Domestic aluminum ingot inventories have drawn down for two consecutive weeks, but absolute levels remain elevated, and the destocking pace needs to accelerate. Macro uncertainties persist, with geopolitical risks from the volatile US-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 fundamental variable.
Industrial Silicon & Polysilicon
Industrial silicon futures strengthened on the 10th, with the main 2609 contract closing at 8,785 yuan per tonne, up 3.17% on the day, and open interest increasing by 7,898 lots to 255,000 lots. The Baichuan spot reference price was 9,186 yuan per tonne, unchanged from the previous session. The price for the lowest deliverable grade fell to 8,600 yuan per tonne, narrowing the spot premium to 30 yuan per tonne from 200 yuan. Polysilicon futures also rose, with the main 2609 contract closing at 36,100 yuan per tonne, up 4.96%, though open interest decreased by 3,667 lots to 101,700 lots. The adjusted standard for the lowest deliverable grade was lowered to 31,000 yuan per tonne, widening the spot discount to 4,330 yuan per tonne. Falling hydropower rates in southwestern China are pushing down the cost floor for industrial silicon production. Producers in the southwest are accelerating restarts, narrowing the price gap between high and low-grade material. Downstream, reduced organic silicon production and resumed polysilicon output are offsetting, leading to a slight overall increase in restocking demand. The market is monitoring the pace of southwestern restarts and the incremental supply of spot material excluding captive use. Entering mid-to-late June, expectations for polysilicon plant restarts and inventory build-up are materializing, putting marginal downward pressure on spot prices, with the polysilicon market's fundamental oversupply persisting. Late-session polysilicon gains were driven by rumors about photovoltaic capacity rationalization; the veracity of these reports is unknown, and caution is advised. Focus is on news from the June 11 industrial silicon meeting in Xinjiang and the announcement of the photovoltaic industry association's Q1 audit results and subsequent measures.
Lithium Carbonate
Lithium carbonate futures (contract 2609) rose 1.27% yesterday to 167,400 yuan per tonne, with open interest increasing by 4,683 lots to 443,500 lots. Spot prices increased, with battery-grade lithium carbonate average price up 2,000 yuan to 165,750 yuan per tonne, industrial-grade up 2,000 yuan to 161,750 yuan/tonne, and battery-grade lithium hydroxide (coarse particle) up 2,000 yuan to 152,000 yuan/tonne. Warehouse receipt inventory increased by 37 tonnes to 55,581 tonnes. In news, companies responded to online reports about lithium concentrate shipments from Zimbabwe. Sinomine Resource confirmed that reports of 5,000 to 7,000 tonnes of lithium concentrate being shipped from its Bikita mine in Zimbabwe in mid-to-late May were largely accurate. Chengxin Lithium Group stated that its Zimbabwe lithium concentrate exports resumed last month, but specific volumes were uncertain, noting that "the quota allocated to us is sufficient." Yahua Group also confirmed shipments had commenced from Zimbabwe but declined to comment on specific tonnages. On the supply side, weekly production increased by 797 tonnes to 26,344 tonnes. June's projected lithium carbonate output is expected to rise 2.6% month-on-month to 116,275 tonnes. Demand projections for June, based on SMM data, show flat ternary cathode material output at 88,990 tonnes, a 3% increase for lithium iron phosphate (LFP) to 504,150 tonnes, a 3% rise for lithium cobalt oxide to 8,250 tonnes, and a 2% decline for lithium manganese oxide to 10,780 tonnes. Other institutions forecast a 6.5% month-on-month increase in cathode material production and a 6.2% rise in battery cell output for June. Global lithium battery production is projected to increase 8.9% month-on-month based on market surveys. Inventory data shows large-sample stocks fell 1,240 tonnes week-on-week to 134,403 tonnes, while small-sample stocks decreased by 630 tonnes to 98,786 tonnes. Breaking down the large-sample data, inventory in other channels fell 3,835 tonnes to 71,359 tonnes, smelter stocks dropped 316 tonnes to 16,615 tonnes, while downstream inventory increased by 2,911 tonnes to 46,429 tonnes. Market sentiment is recovering, with prices stabilizing in the near term. Further upward price correction could occur if positive feedback is seen in the basis and warehouse receipt data. However, caution is warranted as the renewed expansion of downstream inventory stocking ratios could lead to a situation where prices rise without corresponding physical demand if a one-sided market develops, potentially capping short-term gains. The market will then need to watch for new variables that could alter expectations, such as potential Zimbabwe shipment delays, the possible restart of the Jianxiawo mine, and the performance of demand growth.
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