The market for non-ferrous metals is currently experiencing a period of intense conflict between macro expectations and a restructuring of industrial fundamentals. Positive signals from US-Iran talks in Doha, weak US ADP employment data, and dovish signals on inflation risks from Federal Reserve officials initially provided a boost to market sentiment. However, the persistent pressure from a strong US dollar and the suspense surrounding upcoming non-farm payroll data have left macro sentiment fragile. Against this backdrop, the three major base metals—copper, aluminium, and zinc—are charting distinctly different courses based on their own industrial logics.
Copper: A Reshaped Pricing System and an Unchanged Bullish Foundation
The core conflict in the copper market has evolved from a simple supply-demand gap to a rebalancing of pricing power and profit distribution. Chilean miner Antofagasta's agreement with Chinese smelters on a new pricing system linked to spot indices with floor price mechanisms has completely broken the decades-old fixed TC/RC model. This change reflects the reality of strong miner bargaining power and squeezed smelter margins, with spot TC falling to an extreme negative value of -126.8 US dollars per dry metric ton, leaving some smelters barely sustained by by-products.
Despite China entering its traditional off-season with weaker construction and home appliance production schedules, demand from AI data centers and power grid upgrades provides a solid demand base. With macro sentiment dominating short-term fluctuations, low visible inventory levels outside the US offer strong support for copper prices. Copper prices may fluctuate in the short term within a range of 101,500 to 103,700 yuan per ton, but the long-term upward logic remains intact.
Aluminium: Tight Overseas Supply and Domestic Inventory Drawdown Create Resilience
Compared to copper's sensitivity to macro factors, the aluminium market is currently trading on a more concrete logic of supply disruption. Although Norsk Hydro announced the restart of 75,000 tons of capacity at its Slovalco smelter in Slovakia for Q4 2026, the approximately 3 million tons of idled capacity in the Middle East is unlikely to return quickly. LME inventories have fallen to a near four-year low, indicating that tight overseas supply conditions persist.
Domestically, accelerated restarts during the wet season in southwestern China are occurring alongside a rapid drawdown in social inventories to 512,900 tons. Increased air conditioner exports driven by extreme heat in Europe are effectively offsetting traditional off-season weakness. Supported by high profits on the cost side and tightening policy on Guinean bauxite, aluminium prices are demonstrating strong resilience. Prices are expected to trade in a firm to slightly stronger range between 22,300 and 23,100 yuan per ton in the short term.
Zinc: Smelter Losses Force Production Cuts as Market Awaits Correction
The zinc market is deeply mired in a painful period of domestic oversupply and overseas tightness. Both domestic and imported zinc concentrate treatment charges have fallen into negative territory, with smelters facing losses exceeding 2,000 yuan per ton on purchased ore, fueling persistent expectations for production cuts. Although the ILZSG has revised its 2026 global zinc market forecast to a deficit, short-term domestic demand for galvanized steel is being suppressed by hot, rainy weather and a weak property sector, keeping inventories at high levels for this time of year.
On the macro front, rising expectations for a Fed interest rate hike in September are capping zinc's upside potential. The key for a zinc price breakthrough lies in the materialization of smelter production cuts and the potential opening of an export window as the Shanghai-London price ratio falls to near-decade lows. Zinc prices are expected to trade weakly in a range of 24,200 to 24,800 yuan per ton in the short term.
Looking Ahead
Looking forward, the pricing logic for non-ferrous metals is set to diverge significantly. On the macro level, the market is in a vacuum period awaiting the release of Thursday's non-farm payroll data. Significant internal Fed disagreements on the interest rate path suggest high volatility will become the norm.
Investment Strategy
For investment strategy, it is recommended that investors move away from one-sided directional bets and focus on structural opportunities.
For copper, the bullish industrial logic remains intact. It is advisable to consider buying on dips, paying attention to incremental demand from AI infrastructure and new energy while being wary of potential pullbacks driven by US dollar strength.
For aluminium, with overseas spot premiums and inventory drawdown trends established, it can be a preferred choice for long positions. Monitor the progress of European restarts and changes in Middle East geopolitical premiums.
For zinc, facing short-term pressure, range-trading is recommended. Closely track the scale of smelter production cuts and the opening of import/export arbitrage windows, waiting for signals of a correction in the supply-demand mismatch.
Comments