Copper
Copper prices showed strength overnight with domestic refined copper import arbitrage closing. On the macro front, the US ISM Manufacturing New Orders Index for May rose to 56.8, significantly exceeding expectations of 54.8 and the previous reading of 54.1, marking five consecutive months of expansion. New order growth accelerated to a four-month high, and the employment index improved, though inflationary pressures persist. Geopolitically, in protest of Israeli military actions in Lebanon, Iranian media reported that Iran will suspend communication with the US via intermediaries and plans to completely block the Strait of Hormuz. However, former President Trump suggested a US-Iran agreement could be reached within a week to extend the ceasefire and reopen the strait. Inventory data shows LME stocks fell by 3,375 tonnes to 386,050 tonnes; Comex stocks rose by 1,739 tonnes to 582,507 tonnes; SHFE copper warehouse receipts increased by 5,047 tonnes to 99,543 tonnes, while BC copper receipts decreased by 795 tonnes to 11,583 tonnes. Demand-wise, high copper prices are suppressing some procurement activity. While US-Iran tensions have resurfaced, copper prices showed some decoupling from gold overnight. This is attributed to two factors: first, potential renewed sulfur shortages overseas if Strait of Hormuz transit is disrupted; second, renewed high premiums for US copper versus LME copper due to tariff expectations, leading to arbitrage flows that alleviate pressure from expected LME inventory builds. Nonetheless, geopolitical conflicts continue to disturb the global economy, forcing market trade-offs. Overall, copper prices may maintain a firm bias into mid-June, but expectations should be tempered. A potential shift in trend could emerge in late June due to volatility in overseas financial markets and the seasonal transition from peak to off-peak demand in China, warranting careful timing of operations.
Nickel & Stainless Steel
LME nickel rose 1.42% overnight to $19,225/tonne, while SHFE nickel gained 1.26% to 145,030 yuan/tonne. Inventories saw LME stocks decrease by 420 tonnes to 276,444 tonnes, and SHFE warehouse receipts increase by 597 tonnes to 83,855 tonnes. In terms of premiums, the LME 0-3 month spread remained in negative territory; the import nickel premium rose by 300 yuan to -350 yuan/tonne. Supply is actively tightening. One factor is the maintenance phase at an Indonesian mine due to quota issues; based on policy, additional quotas may be released in the second half of the year, but this is price-dependent. Another factor is reduced operational loads at some Indonesian projects following policy adjustments to HPM and due to nickel ore and sulfur prices. On the demand side, June production schedules suggest ternary cathode material output will be flat month-on-month, while stainless steel nickel consumption will see a slight decline. However, primary nickel inventory pressure continues to build, and the drop in June electrolytic nickel production is not significant, keeping inventory the core issue as supply cuts have yet to materialize in stock data. Against a backdrop of policy support, active supply tightening, and high inventories, a range-bound view is maintained, with close attention on inventory changes.
Alumina, Electrolytic Aluminum & Aluminum Alloy
Alumina weakened overnight, with the AO2609 contract settling at 2,868 yuan/tonne, down 0.69%. Open interest increased by 6,370 lots to 318,000 lots. Electrolytic aluminum strengthened, with the AL2607 contract settling at 24,435 yuan/tonne, up 0.49%, as open interest fell by 4,018 lots to 289,700 lots. Aluminum alloy also firmed, with the main AD2607 contract settling at 23,145 yuan/tonne, up 0.41%, and open interest rising by 439 lots to 12,381 lots. Spot-wise, SMM's alumina price rebounded to 2,681 yuan/tonne. Aluminum ingot spot discounts narrowed to 80 yuan/tonne. Foshan A00 aluminum was quoted lower at 24,040 yuan/tonne, at a 150 yuan discount to Wuxi A00. Aluminum billet processing fees were stable, with fees in Baotou, Henan, Linyi, and Wuxi up 20-150 yuan/tonne. Aluminum rod (1A60 series) processing fees were steady, as were fees for 6/8 series; fees for low-carbon 6/8 series fell by 15 yuan/tonne. With Guinea's export control measures set to take effect in June, short positions continued to unwind defensively. New alumina capacity coming online and concentrated import arrivals are ongoing, while aluminum smelters are slow to take delivery, potentially accelerating inventory builds, creating fundamental pressure on alumina. During the uncertain period before Guinea's quota policy is clarified, left-side trading carries high risk; it's prudent to wait for policy clarity and adjusted expectations before considering short positions. The trading logic for electrolytic aluminum has shifted, with broader metals sentiment constrained by macro factors and capital flows rotating. Yunnan is expected to see some production restarts in June, while downstream demand seasonally weakens from peak levels, with only battery cells and exports providing resilience. Aluminum prices are unlikely to break out of their current range upwards. As domestic and overseas inventory trends converge, the price spread between markets may narrow slightly. Future price rallies depend on whether macro sentiment shows signs of recovery and whether supply-side production curtailment narratives gain traction, alongside monitoring off-season destocking pace and overseas geopolitical developments.
Industrial Silicon & Polysilicon
Industrial silicon firmed on the 1st, with the main 2609 contract settling at 8,745 yuan/tonne, up 1.92% on the day. Open interest increased by 459 lots to 268,000 lots. The Baichuan spot reference price was 9,129 yuan/tonne, unchanged from the previous session. The lowest deliverable grade price fell to 8,600 yuan/tonne, turning the spot premium into a 145 yuan/tonne discount. Polysilicon also strengthened, with the main 2606 contract settling at 38,280 yuan/tonne, up 3.38% on the day, and open interest rising by 2,243 lots to 89,130 lots. The adjusted lowest deliverable standard fell to 31,000 yuan/tonne, expanding the spot discount to 7,280 yuan/tonne. Rising silicon coal and petroleum coke prices, linked to coking coal, have increased industrial silicon costs, delaying planned restarts at some southwest producers originally scheduled for late May. However, recent electricity tariff cuts in the southwest may help offset cost pressures. Inventories are shifting from producers to traders, continuing to accumulate, with both warehouse receipts and social stocks capping upside, while support is found near the full production cost in the southwest. In mid-June, leading polysilicon producers are set to resume production, fully revealing supply pressure. Policies promoting direct green power connections are slow to take effect, failing to spur significant bulk procurement from end-users. Constrained by hedging pressure and high inventory realities, polysilicon producers' previous price support strategy is difficult to sustain. Market focus this week is on the solar exhibition, with negotiations in a brief lull. Caution is advised while awaiting further developments, as the market remains vulnerable to high volatility from both confirmed and unconfirmed news.
Lithium Carbonate
The lithium carbonate futures 2609 contract fell 0.71% yesterday to 178,900 yuan/tonne, with open interest increasing by 5,887 lots to 433,700 lots. Spot prices saw battery-grade lithium carbonate average rise by 1,500 yuan/tonne to 179,000 yuan/tonne, industrial-grade by 1,500 yuan/tonne to 175,500 yuan/tonne, and battery-grade lithium hydroxide (coarse particle) by 1,250 yuan/tonne to 164,750 yuan/tonne. Warehouse receipts increased by 1,020 tonnes yesterday to 55,215 tonnes. On the supply side, weekly production fell by 346 tonnes week-on-week to 25,547 tonnes; June production is forecast to increase 2.6% month-on-month to 116,275 tonnes. Demand-side data from SMM estimates June ternary cathode material output flat month-on-month at 88,990 tonnes, lithium iron phosphate (LFP) up 3% to 504,150 tonnes, lithium cobalt oxide up 3% to 8,250 tonnes, and lithium manganese oxide down 2% to 10,780 tonnes. Other agencies forecast June cathode material production up 6.5% month-on-month and battery cell production up 6.2%. Global lithium-ion battery production is estimated to rise 8.9% month-on-month based on market surveys. Inventory data shows large-sample stocks fell 1,617 tonnes week-on-week to 135,643 tonnes, while small-sample stocks dropped 1,247 tonnes to 99,416 tonnes. Breaking down the large-sample data, inventory in other sectors fell 963 tonnes to 75,194 tonnes, smelter stocks fell 1,443 tonnes to 16,931 tonnes, while downstream inventory rose 789 tonnes to 43,518 tonnes. Two key supply-side factors warrant attention: the shipment progress and arrival schedule of Zimbabwean spodumene concentrate, and recent unverified rumors about the restart of a major Jiangxi mine, which lacks official confirmation. On demand, preliminary production schedules from various agencies suggest battery production remains robust, though cathode material growth is slowing. Note that agencies have revised down some May data. Monthly balance sheets still indicate a supply deficit for June, with total inventories likely to continue a gradual decline and social inventory turnover days potentially falling further. Currently, the consensus is for supply increases alongside steady demand growth, suggesting prices may trade in a range in the near term. Given strong current fundamentals and expectations, a strategy of buying on dips is favored. However, risks lie in potential supply exceeding expectations or demand underperforming, which could trigger significant negative feedback.
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