According to Zhitong Finance APP, China Post Securities released a research report stating that this week the market continued to trade on the Federal Reserve's consecutive rate hikes, U.S. Treasury yields kept rising, and precious metals remained under pressure. If core PCE data shows some degree of weakening, there will be a sharp reversal in rate hike expectations, and gold prices are expected to rebound; in copper, after the Fed rate hike was implemented, market sentiment warmed, copper prices gradually recovered, domestic inventories fell to a year-low, and the spot premium broke above 1,400 yuan; aluminum inventories destocking supported aluminum prices, and profile demand recovered; for tin, the rate hike shock has landed, and buying on dips is recommended. Overall, the bank believes that the September rate hike means the negative factor has landed, and if prices adjust after the rate hike, it is a relatively clear opportunity to get on board. The main views of China Post Securities are as follows:
Precious Metals: Awaiting an Expectation Reversal
This week the market continued to trade on the Federal Reserve's consecutive rate hikes. With continued hawkish remarks from Fed officials, U.S. Treasury yields kept rising, and precious metals remained under pressure. The Fed's actual future actions will still center on inflation trends. Attention should be paid to next week's core PCE data. If there is some degree of weakening, there will be a sharp reversal in rate hike expectations, the U.S. term spread is expected to rise rapidly, and gold prices are expected to rebound. From the perspective of allocation funds, central banks continued to significantly increase gold holdings, and the bottom for gold is relatively clear. Overall, the bank believes that the September rate hike means the negative factor has landed, and if prices adjust after the rate hike, it is a relatively clear opportunity to get on board.
Copper: After the Fed Rate Hike Landed, Market Sentiment Warmed and Copper Prices Gradually Recovered
On the fundamentals side, disruptions at the mine end such as strikes and wage negotiations continued, Chile's copper output declined in the first half of the year, and TC continued to fall. In October, domestic smelters will have concentrated maintenance, and output may continue to be revised downward. COMEX inventories are still rising slightly, domestic inventories have fallen to a year-low, and the spot premium broke above 1,400 yuan. On the macro side, several Fed officials took a hawkish stance. Short-term macro headwinds may amplify volatility, but after a pullback the recovery momentum is strong. It is recommended to pay attention to the tariff situation on September 28, the Escondida wage negotiations, the realization of October maintenance, and November long-term contract negotiations.
Aluminum: Inventory Destocking Supports Aluminum Prices, Profile Demand Recovers
This week Shanghai aluminum prices fluctuated due to macro disturbances, but the spot premium further increased, the aluminum-to-water conversion rate remained high, and visible inventories continued to be destocked. The premium in the South China market continued to rise relative to the northern market, indicating that stage-specific profile demand was the main force supporting firm spot prices. The market currently expects that the Middle East can complete part of its production resumption by 2027, but substantial production resumption is unlikely in the short term. Electrolytic aluminum supply and demand will still be relatively tight during the year, and domestic aluminum prices are expected to see some rebound in September-October, but long-term valuation may still be suppressed by forward supply. Tsingshan's commissioning in Indonesia may put pressure on 2027 prices. Overall, 2027 is a year of relatively loose electrolytic aluminum supply, and it is recommended to reduce positions on rallies.
Tin: The Rate Hike Shock Has Landed, Buying on Dips Is Recommended
This week tin prices fluctuated. After the Fed rate hike landed, tin prices showed obvious support. The raw material end remained in short supply, AI data center demand was strong, and social inventories remained at a low level, underpinning tin prices. The bank believes that low inventories and tightening at the mine end provide fundamental support. The short-term impact of the Fed rate hike on tin prices has ended, and tin prices may rebound driven by U.S. technology stocks. Buying on dips is recommended.
Tungsten: Tungsten Prices Continued to Adjust
This week tungsten prices continued to adjust. Downstream end-user demand was poor, leading tungsten enterprises continued to lower long-term contract quotes in the second half of September, and although smelters reduced loads, industry inventories were high and orders from downstream powder enterprises were poor, highlighting the supply-demand conflict, with traders mainly cutting prices to clear goods. The bank believes that subsequent attention should focus on price performance of tungsten powder, APT, and others, as well as destocking progress. A recovery in end-user demand is a necessary condition for tungsten prices to rise. In the medium to long term, domestic strengthening of control over tungsten ore supply indicators and mining, along with high overseas price spreads, may push the medium- to long-term center of tungsten prices upward.
Lithium: The Main Contract Fluctuated Widely During the Week, While Spot Prices Rose First and Then Fell
Spodumene arrivals fell short of expectations combined with maintenance, and weekly output declined somewhat; on the demand side, pre-holiday restocking continued, warehouse receipts continued to be destocked, but the game between supply-side production cuts and downstream procurement pace continued. In the short term, a range-bound pattern may persist. Attention should be paid to the sustainability of pre-holiday restocking and warehouse receipt destocking.
Molybdenum: During the Week, Molybdenum Concentrate (40-45%) Prices Were Slightly Revised Down but Still Stable in the 5,400-5,500 Yuan/Ton Unit Range, With Active Steel Bidding, Mines Reluctant to Sell, and High-Level Weak Operation
In the medium to long term, there will be no obvious increase in supply before 2028, and demand from military, oil and gas, and "molybdenum replacing tungsten" will strengthen. Molybdenum prices are expected to rise further.
Risk Warning: Significant Macroeconomic Fluctuations, Demand Falling Short of Expectations, Supply Release Exceeding Expectations, and Company Project Progress Falling Short of Expectations.
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