Copper: Geopolitical Disturbances Intensify, Copper Prices Consolidate
1. Macroeconomic Environment. The minutes from the June FOMC meeting released by the Federal Reserve indicate a growing number of officials believe the AI investment boom could be a significant driver keeping inflation persistently high, with Middle East conflicts and tariff policies identified as two other major inflation risks. If inflation remains elevated this year, further interest rate hikes may be necessary; conversely, if price pressures ease quickly, the Fed could maintain its current stance. Divisions within the Fed regarding monetary policy communication are emerging. Governor Waller has stated that forward guidance remains a valuable policy tool, contrasting with positions held by others. Fed Chair Wash will attend a Senate Banking Committee hearing on July 15th. This hearing will focus on the Fed's semi-annual monetary policy report to Congress and may provide some guidance on interest rates and monetary policy direction. Geopolitically, renewed conflict has erupted between the US and Iran. As both sides escalate their strikes, the risk to navigation through the Strait of Hormuz has increased again.
2. Fundamentals. On the copper concentrate front, the domestic TC (treatment and refining charges) quotation has declined again, reaching a historically extreme low. This indicates that tightness in copper concentrate supply remains unresolved and continues to be a strong supportive factor for the current fundamental picture. Chilean miner AMSA and major domestic smelters finalized a mid-year long-term pricing agreement on July 1st, for the first time abandoning the traditional fixed TC model in favor of a "floor price + index linkage" pricing mechanism. Regarding refined copper production, estimated July output is 1.1661 million tonnes, up 1.8% month-on-month but down 0.7% year-on-year. Imports: China's net refined copper imports in May increased 14.4% year-on-year to 296,200 tonnes, but the cumulative year-on-year figure is still down 17.81%. May scrap copper imports fell 9.78% month-on-month to 191,000 metal tonnes, up 3.14% year-on-year, with a cumulative year-on-year increase of 7.11%. Inventory: As of July 10th, global visible copper inventories decreased by 45,000 tonnes from the previous count (July 3rd) to 1.121 million tonnes. Specifically, LME inventory fell by 12,400 tonnes to 306,500 tonnes; Comex inventory rose by 7,115 tonnes to 613,741 tonnes. Domestic refined copper social inventories fell by 34,900 tonnes week-on-week to 165,000 tonnes, while bonded zone inventories dropped by 4,400 tonnes to 35,300 tonnes. Demand: Downstream users maintain purchases based on immediate needs, with weak willingness to stock up at high prices.
3. Market Outlook. Recent market conditions feature both macro disturbances and fundamental support. The steady decline in TC and accelerated destocking in China provide strong support for copper prices. However, hawkish expectations from the Fed and frequent disturbances from Middle East geopolitical conflicts act as macro headwinds. The week of July 13th enters a dual-verification moment for the market with "Wash's Congressional debut and CPI data." US June CPI data and Wash's House hearing will coincide on the 14th, followed by PPI data release and Wash's Senate testimony on the 15th. Market expectations regarding Fed monetary policy are likely to fluctuate repeatedly. Additionally, Middle East conflicts persist. If subsequent negotiation signals emerge and strengthen, the market may lean optimistic. Conversely, if conflicts escalate further, they could pressure copper prices through dual channels of oil prices and inflation expectations. Overall, copper prices are likely to remain range-bound within the current interval, with market volatility still low. This also suggests significant upward or downward moves still await a catalyst.
Nickel & Stainless Steel: Sentiment Slightly Warms, Policy Provides Minor Boost
1. Supply. The weekly premium for 1.6% nickel ore remained flat week-on-week at $3 per tonne. The weekly delivered price for 1.2% nickel ore decreased by $0.5 per tonne week-on-week to $29.5 per tonne, while the 1.6% grade price was unchanged. Based on the first HPM price for July, 1.2% and 1.6% nickel ore prices decreased by $2.13/tonne and $3.55/tonne, respectively.
2. Demand. For new energy, ternary cathode material weekly production decreased by 372 tonnes week-on-week to 19,670 tonnes, with weekly inventory up 85 tonnes to 20,199 tonnes. On the terminal side, according to the China Passenger Car Association, June new energy passenger vehicle production reached 1.439 million units, up 21.4% year-on-year and 3.0% month-on-month. Wholesale sales reached 1.481 million units, up 19.2% year-on-year and 9.6% month-on-month. Retail sales were 1.007 million units, down 9.4% year-on-year but up 6.0% month-on-month. New energy passenger vehicle exports by manufacturers were 499,000 units, surging 152.7% year-on-year and 17.6% month-on-month.
3. Inventory. LME nickel inventory decreased by 36 tonnes during the week to 274,584 tonnes. SHFE nickel inventory fell by 2,545 tonnes to 99,077 tonnes. Social inventory decreased by 3,984 tonnes to 126,406 tonnes, while bonded zone inventory dropped by 1,000 tonnes to 700 tonnes.
4. Market Outlook. During the week, Indonesia, based on Finance Minister Regulation (KMK) No.32/MK/BC/2026 (implementing Trade Minister Regulation No.17/2026), further strengthened export supervision of high-value-added nickel products. The new regulations target products under HS Code Ex.7202.60.00, including ferronickel (FeNi) ingots/blocks with nickel content ≥8%, sponge ferronickel (Sponge FeNi) and nugget ferronickel (Nugget FeNi) with nickel content ≥4%, and low-grade ferronickel products with nickel content 2%≤Ni<4% and iron content ≥75% (covering some NPI products). Export now requires an inspection report (LS) and relevant export permits. Starting January 1, 2027, exports will, in principle, only be allowed through state-owned export enterprises (BUMN Ekspor), with exemptions possible under specific circumstances. Warming macro sentiment, coupled with the policy potentially affecting some export timing, provides a backdrop. However, for the current nickel industry chain, inventory pressure remains the core contradiction. Weekly inventories showed some destocking, but the overall base remains large, requiring attention to sustainability. Meanwhile, nickel ore prices may continue to weaken, potentially reducing cost support. Additionally, it's important to note that if quota allocations continue in the second half of the year, prices may still face pressure.
Aluminum: Premiums Retrace, Narrow Range Recovery
The alumina futures market was weak with fluctuations during the week. As of the 10th, the main contract closed at 2,715 yuan/tonne, down 0.1% for the week. SHFE aluminum was also weak with fluctuations, with the main contract closing at 23,055 yuan/tonne, up 0.9% for the week. Aluminum alloy futures were relatively strong with fluctuations, with the main contract closing at 22,965 yuan/tonne, down 0.81% for the week.
1. Supply. According to SMM, the weekly operating rate for alumina increased by 0.11% to 74.38%, with weekly output rising by 2,000 tonnes to 1.689 million tonnes. Following production pressure on Shanxi plants due to environmental controls on red mud, an alumina plant in Guizhou conducted boiler line switching and equipment maintenance. Overseas, EGA announced the restart of its Al Taweelah alumina refinery. For primary aluminum, SMM data shows the weekly operating rate was stable at 98.63%, with weekly output steady at 875,600 tonnes. The weekly proportion of molten aluminum used for casting rose by 0.32% to 77.76%.
2. Demand. The off-season effect deepened, with processing sector operating rates continuing to adjust downward. The average operating rate for processing enterprises decreased by 0.7% week-on-week to 61.9%. By segment: aluminum sheet/plate operating rate fell 0.6% to 69.4%; aluminum cable/wire operating rate dropped 2.4% to 66.6%; aluminum extrusion operating rate decreased 0.6% to 53.1%; aluminum foil operating rate declined 0.4% to 71.4%. Recycled aluminum alloy operating rate fell 0.4% to 51.4%. Aluminum billet processing fees were stable in Henan and Linyi but decreased by 90-490 yuan/tonne in other regions. Aluminum rod processing fees were down across the board by 250-300 yuan/tonne.
3. Inventory. For exchange inventories: alumina weekly stocks increased by 9,637 tonnes to 154,800 tonnes; SHFE aluminum weekly stocks decreased by 24,200 tonnes to 481,700 tonnes; LME weekly stocks fell by 7,825 tonnes to 287,700 tonnes. For social inventories: alumina weekly stocks increased by 22,000 tonnes to 913,000 tonnes; aluminum ingot weekly stocks decreased by 52,000 tonnes to 1.078 million tonnes; aluminum billet weekly stocks fell by 13,500 tonnes to 116,500 tonnes.
4. Market Outlook. Local alumina shipments in Guangxi were temporarily restricted due to flooding, and the new project in Fangchenggang may be delayed, introducing marginal supply-side disturbances. However, weather-related disruptions are not sustainable and have not substantially impacted local production. With the return of maintenance capacity in Shanxi and Guizhou, coupled with the backlog of canceled warrants and in-transit inventory, spot supply pressure is evident. The market premium related to sentiment over Guinea mining policies has largely been priced out. Moreover, with alumina prices approaching the break-even line for low-cost capacity, resistance to further declines is increasing. Alumina is expected to stabilize at low levels in the short term, with caution needed for potential short-term, pulse-like rebounds before the flood situation becomes clear. For primary aluminum, the temporary US-Iran agreement has changed, leading to a return of geopolitical risk premium and a shift in market drivers, providing new support for aluminum prices. Simultaneously, LME inventories hit a new low, and the pace of domestic social inventory digestion after the price decline far exceeded expectations, creating a temporary resonance with macro disturbances. However, the pricing weight given to overseas capacity restarts combined with weakening terminal orders during the consumption off-season is relatively high, limiting significant upside potential. Aluminum prices are expected to continue a narrow-range recovery.
Industrial Silicon & Polysilicon: Sentiment Boosted, Beware of Volatility
Industrial silicon futures were relatively strong with fluctuations during the week. On the 10th, the main contract 2609 closed at 8,430 yuan/tonne, up 0.84% for the week. Polysilicon futures were also relatively strong, with the main contract 2609 closing at 36,060 yuan/tonne, up 1.65% for the week. Spot prices declined across the board: non-oxygenated 553 grade fell 50 yuan/tonne to 8,850 yuan/tonne; oxygenated 553 grade fell 50 yuan/tonne to 9,050 yuan/tonne; 421 grade fell 50 yuan/tonne to 9,450 yuan/tonne.
1. Supply. According to BaiChuan, weekly industrial silicon output increased by 900 tonnes week-on-week to 86,500 tonnes. The weekly furnace operating rate decreased by 0.39% to 33.2%, with 3 fewer furnaces in operation for a total of 257. Northwest China remained stable with 158 furnaces operating; Southwest China was stable with 71 furnaces operating. In other regions, 3 furnaces were shut down in Inner Mongolia.
2. Demand. N-type polysilicon weekly price fell by 650 yuan/tonne to 31,500 yuan/tonne. N-type mixed material weekly price fell by 500 yuan/tonne to 29,500 yuan/tonne. New order transactions in the market showed no significant increase, continuing the pattern of deal-by-deal negotiations. Downstream wafer inventory is insufficient. After spot prices fell near cost-support levels, a stalemate has begun. Organic silicon weekly price increased by 900 yuan/tonne to 14,000 yuan/tonne. At the end of June, manufacturers sold to recoup funds, but new orders in July have been scarce. The July industry meeting provided updated production restriction guidance, raising the previous 40% restriction quota from the last meeting to 60%. Current production cuts have not yet been implemented, but subsequent marginal reductions may accelerate. Weekly polysilicon output increased by 300 tonnes to 23,000 tonnes. Weekly DMC output decreased by 900 tonnes to 37,900 tonnes.
3. Inventory. For exchange inventories: industrial silicon weekly stocks increased by 1,580 tonnes to 160,000 tonnes; polysilicon weekly stocks increased by 1,300 tonnes to 51,800 tonnes. For social inventories: industrial silicon weekly stocks increased by 3,000 tonnes to 469,000 tonnes, with plant inventory rising by 3,000 tonnes to 268,500 tonnes. Huangpu Port inventory was stable at 63,000 tonnes; Tianjin Port stable at 81,500 tonnes; Kunming Port stable at 56,000 tonnes. Polysilicon plant inventory increased by 6,600 tonnes week-on-week to 288,700 tonnes.
4. Market Outlook. News during the week, including a major northern producer halting sales, some capacity switching production, and concentrated maintenance in Yili, Xinjiang, helped the futures market stabilize after declines. However, the actual impact is relatively limited. The Yili shutdowns remain at the rumor stage, with overall high operating rates continuing in the north. The resumption of production in the southwest during the wet season is largely complete. A new round of production control in the organic silicon sector has expanded. The supply-demand gap continues to widen, making a trend reversal for industrial silicon unlikely in the short term. The latest "15th Five-Year Plan Carbon Peaking Action Plan" proposes a target of 2800 GW for total installed photovoltaic capacity. Additionally, recent rumors suggest the initiation of inspections on the actual energy consumption levels of polysilicon enterprises, with policy measures continuously boosting market sentiment. Fundamentally, high inventory pressure remains unresolved. New marginal increments are expected from the ramp-up of leading producers' restarted capacity after July. A market turning point has not yet emerged in the short term, and polysilicon remains in a bottoming phase. Attention should be paid to merger and acquisition news and the pace of terminal project advancement, awaiting a true resonance between fundamentals and policy, while being cautious of repeated market fluctuations.
Lithium Carbonate: Equity-Commodity Sentiment Weakens, Focus on Spot Feedback
1. Supply. Weekly production decreased by 30 tonnes week-on-week to 26,399 tonnes. Spodumene-based production fell by 27 tonnes to 15,418 tonnes; lepidolite-based production increased by 20 tonnes to 3,160 tonnes; salt lake-based production decreased by 30 tonnes to 4,600 tonnes; recycling-based production increased by 7 tonnes to 3,221 tonnes.
2. Demand. Ternary cathode material weekly production decreased by 372 tonnes week-on-week to 19,670 tonnes, with weekly inventory up 85 tonnes to 20,199 tonnes. Lithium iron phosphate (LFP) cathode weekly production increased by 439 tonnes to 119,149 tonnes, with weekly inventory down 3,844 tonnes to 136,416 tonnes. According to the China Passenger Car Association, June new energy passenger vehicle production reached 1.439 million units, up 21.4% year-on-year and 3.0% month-on-month. Wholesale sales reached 1.481 million units, up 19.2% year-on-year and 9.6% month-on-month. Retail sales were 1.007 million units, down 9.4% year-on-year but up 6.0% month-on-month. New energy passenger vehicle exports by manufacturers were 499,000 units, surging 152.7% year-on-year and 17.6% month-on-month. In June 2026, energy storage system bidding volume was 6.1GW/48.3GWh, down 58.5% year-on-year but up 37.4% in GWh terms, and down 12.7% month-on-month but up 118.1% in GWh terms. EPC (including PC) bidding volume reached 19.3GW/56.4GWh, up 111.7% year-on-year and 154.4% in GWh terms, and up 41.8% month-on-month and 43.2% in GWh terms. In June 2026, energy storage system winning bid volume was 4.7GW/13.8GWh, up 364.9% year-on-year and 341.1% in GWh terms, and up 53.5% month-on-month and 9.1% in GWh terms. EPC (including PC) winning bid volume was 12.5GW/32.3GWh, up 54.3% year-on-year and 87.4% in GWh terms, and up 23.9% month-on-month and 55.1% in GWh terms.
3. Inventory. Large-sample inventory decreased by 3,423 tonnes week-on-week to 124,381 tonnes. Small-sample inventory decreased by 2,337 tonnes week-on-week to 92,236 tonnes. Using the large-sample breakdown, inventory in other segments fell by 1,135 tonnes to 61,627 tonnes; smelter inventory decreased by 1,175 tonnes to 12,415 tonnes; downstream inventory decreased by 1,113 tonnes to 50,339 tonnes.
4. Market Outlook. Based on production schedules, July may see destocking of around 14,000 tonnes, with the pace potentially accelerating in the short term. However, medium-term caution is warranted regarding supply increments from the resumption of Jianxiawo and the concentrated arrival of Zimbabwean lithium ore, which could lead to a month-by-month decrease in the monthly destocking level in Q3. Against the backdrop of bearish sentiment for next year's fundamentals, market optimism has faded, and related industrial chain stocks have weakened. Short-term focus is on support at previous lows. However, from a valuation perspective, we believe there is still room for further downside. It is recommended to monitor whether the spot market can provide further positive feedback.
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