Daily analysis of the non-ferrous metals market, covering copper, nickel, stainless steel, alumina, electrolytic aluminum, aluminum alloy, industrial silicon, polysilicon, and lithium carbonate.
Copper
Copper prices showed modest strength overnight, with China's refined copper import window now closed. On the macro front, U.S. job openings surged to 7.62 million in April, the highest level in nearly two years and significantly exceeding expectations, indicating resilience in the labor market. The upcoming U.S. non-farm payrolls data on Friday is a key focus. Geopolitical tensions have risen as Iran, in protest of Israeli actions in Lebanon, has reportedly suspended indirect talks with the U.S. and plans to fully blockade the Strait of Hormuz, complicating negotiations. However, recent copper price action appears somewhat desensitized to these events, not moving in tandem with gold. Two factors may explain this: first, a blockade could exacerbate global sulfur shortages; second, a U.S. tariff premium has made U.S. copper more attractive, drawing metal away from LME warehouses and easing pressure from expected LME stock builds. While geopolitical risks continue to cloud the global economic outlook, copper prices are expected to maintain a cautiously positive, range-bound tone through mid-June. Expectations should be tempered, however, as a potential shift could occur in late June due to financial market volatility overseas and the seasonal transition from peak to off-peak demand in China.
Nickel and Stainless Steel
LME nickel closed slightly higher at $19,215 per ton, while SHFE nickel edged down to 144,190 yuan per ton. LME inventories fell by 1,104 tons to 275,340 tons, while SHFE warehouse receipts rose by 418 tons to 84,273 tons. The LME cash-to-3-months spread remains in contango, and the import premium for nickel stands at -350 yuan per ton. Supply is tightening voluntarily. One Indonesian mine has entered maintenance due to quota issues, with potential new quotas expected in the second half of the year, though this is price-dependent. Additionally, adjustments to Indonesia's HPM policy and costs for nickel ore and sulfur have led to reduced operating rates at some projects. On the demand side, June production schedules for ternary cathode materials are expected to be flat month-on-month, while nickel consumption for stainless steel is set to dip slightly. The core issue remains persistently high inventories of primary nickel, as June's planned reduction in electrolytic nickel output is insufficient to alleviate the pressure. With policy support, voluntary supply cuts, and high inventories, the market is expected to trade within a range. Monitoring inventory changes for any positive feedback is crucial.
Alumina, Electrolytic Aluminum, and Aluminum Alloy
Alumina futures weakened overnight, with the AO2609 contract settling at 2,820 yuan per ton, down 1.23%, and open interest rising. Electrolytic aluminum (AL2607) gained 0.79% to 24,775 yuan per ton, with reduced open interest. Aluminum alloy (AD2607) rose 0.9% to 23,500 yuan per ton, with a slight increase in open interest. Spot SMM alumina prices retreated to 2,680 yuan per ton. Aluminum ingot spot discounts widened to 90 yuan per ton. The Foshan A00 price rebounded to 24,190 yuan per ton, trading at a 130 yuan discount to Wuxi A00. Processing fees for aluminum rods were steady in some regions but down 20-70 yuan in others. Aluminium rod processing fees for the 1A60 series fell by 50 yuan, while fees for the 6/8 series were stable; low-carbon 6/8 series fees rose 113-163 yuan. The alumina market faces fundamental pressure from new capacity coming online and concentrated import arrivals, coupled with slow pickup rates from smelters, which may accelerate inventory builds. During the uncertain period regarding Guinea's bauxite quota policy, initiating bearish positions carries high risk. It is prudent to wait for policy clarity and a reassessment of expectations before considering short positions. The renewed U.S.-Iran tensions, with Iran's threat to blockade the Strait of Hormuz, has reintroduced a geopolitical risk premium. In China, Yunnan is set to resume production in June, while downstream demand is seasonally transitioning from peak to off-season, with only battery cell demand and exports providing support. As domestic and international inventory trends converge, the price gap has room to narrow slightly. Whether aluminum prices can sustain further gains depends on a potential improvement in macro sentiment, the development of supply-side production cut narratives, and the pace of inventory draws during the off-season, alongside changes in the overseas geopolitical situation.
Industrial Silicon and Polysilicon
Industrial silicon futures were slightly weaker, with the main 2609 contract settling at 8,690 yuan per ton, down 0.06%, and open interest falling. The Baichuan spot reference price rose 17 yuan to 9,146 yuan per ton. The price for the lowest deliverable grade fell to 8,600 yuan per ton, widening the spot premium to 55 yuan. Polysilicon futures also weakened, with the main 2606 contract down 0.19% to 37,510 yuan per ton, and open interest rising. The adjusted price for the lowest deliverable standard was lowered to 31,000 yuan per ton, narrowing the spot discount to 6,510 yuan. Rising costs for silicon coal and petroleum coke have increased production costs for industrial silicon, leading some Southwest China producers to delay restarts planned for late May. However, recent electricity tariff cuts in the Southwest may help offset cost pressures. High inventories at both factories and in social warehouses, along with elevated warehouse receipts, are capping price upside, while support is found near the full production cost in Southwest China. In mid-June, leading polysilicon producers are scheduled to resume operations, fully bringing supply pressure to the fore. The slow implementation of green power direct connection policies has limited bulk procurement from end-users. Faced with hedging pressure and high inventories, polysilicon producers' previous price support strategies are difficult to maintain. Market attention this week is on the photovoltaic exhibition. The market is in a short-term negotiation lull, warranting caution and vigilance for high volatility driven by market rumors.
Lithium Carbonate
The lithium carbonate futures 2609 contract fell 3.91% to 172,980 yuan per ton, with open interest decreasing. Spot prices declined: battery-grade lithium carbonate averaged 175,750 yuan per ton (down 3,250 yuan), industrial-grade averaged 172,250 yuan per ton (down 3,250 yuan), and battery-grade lithium hydroxide (coarse particle) fell to 161,000 yuan per ton (down 3,250 yuan). Warehouse receipts increased by 775 tons to 55,990 tons. Weekly production fell by 346 tons to 25,547 tons, while June's total output is forecast to rise 2.6% month-on-month to 116,275 tons. On the demand side, SMM data forecasts June production for ternary cathode materials to be flat at 88,990 tons, lithium iron phosphate (LFP) to grow 3% to 504,150 tons, lithium cobalt oxide to increase 3% to 8,250 tons, and lithium manganese oxide to fall 2% to 10,780 tons. Other industry forecasts suggest a 6.5% month-on-month increase for cathode materials and a 6.2% increase for battery cell production in June. Global lithium battery production is projected to rise 8.9% month-on-month. Total inventory (large sample) fell by 1,617 tons week-on-week to 135,643 tons, while the small sample inventory dropped 1,247 tons to 99,416 tons. Breaking down the large sample, inventory in other channels fell by 963 tons to 75,194 tons, smelter inventory decreased by 1,443 tons to 16,931 tons, while downstream inventory rose by 789 tons to 43,518 tons. Two key supply-side factors warrant attention: the shipment and arrival schedule of lithium concentrate from Zimbabwe, and unconfirmed rumors regarding the restart of a major Jiangxi mine. Demand remains robust based on preliminary production schedules, though cathode material growth is slowing. It's noted that some agencies have revised down their May data. The monthly balance for June still indicates a supply deficit, with total inventories likely to continue a gradual drawdown and social inventory turnover days potentially falling further. The consensus is for increasing supply and steadily rising demand. However, persistently high warehouse receipt levels are exerting downward pressure, making this a focal point for short-term market dynamics.
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