Recommended focus: Copper, Tin.
Strategy: Buy on dips for Copper and Tin.
Strategy horizon: Short to medium term.
Holiday Overseas Metals Market Review
During the domestic holiday period, overseas metals prices fell first and then rebounded. In the earlier phase, market expectations for another Federal Reserve rate hike in October remained relatively strong, mainly due to renewed tensions in the Middle East, firmer crude oil prices, and rising U.S. Treasury yields, all of which pushed the U.S. dollar index to a more than one-year high, weighing on metals prices. Later, U.S. September core CPI eased on a month-on-month basis, and September non-farm payrolls came in well below market expectations, which cooled October rate hike expectations, causing the dollar index to retreat and metals prices to stabilize and rebound. However, the rebound was limited, and prices ended the period lower across the board, with zinc posting the largest decline of more than 3%, while nickel and aluminum fell more than 2%. In the near term, there remains significant uncertainty in the macroeconomic and geopolitical environment, especially with the unclear outlook for the Middle East situation. Against this backdrop, base metals prices lack sustained upward momentum. Nevertheless, considering that overall fundamentals are relatively sound, inventories are generally not high and remain in a destocking trend, the downside for metals prices is limited. If the macroeconomic environment improves, prices still have room to rebound.
Copper
During the domestic holiday period, overseas copper prices fell first and then rebounded, with the market mainly driven by macro factors. The CL spread remains in positive territory, and the COMEX market continues to show a C structure. Market expectations for a U.S. copper tariff persist, and the probability of large-scale U.S. copper outflows is low. Due to smelter production cuts globally caused by tight copper concentrate and scrap supply, as well as resilient global copper consumption supported by AI, the copper supply-demand imbalance has intensified. Currently, non-U.S. copper spot supply is severely tight, LME inventories continued to destock during the holiday, and domestic inventories are also at low levels. The spot tightness provides strong support and upward elasticity for copper prices. The non-farm payroll data released during the holiday fell short of expectations, reducing market rate hike expectations. However, oil price risks have not been resolved, and rate hike expectations still exist, so copper prices may still seesaw in the short term. If macroeconomic sentiment improves later, copper prices are still expected to return to strength amid spot tightness, and buying on dips can be considered.
Aluminum
During the domestic holiday period, overseas aluminum prices fell and then rebounded, recording a weekly decline of more than 2%. Before the holiday, domestic aluminum prices also weakened, with risk-aversion sentiment dominating the market. China remains in the "Golden September and Silver October" peak season, and overall consumption remains relatively good. Overseas markets will also see pre-Christmas orders. Although Gulf region capacity is recovering and new capacity in Southeast Asia is coming online, short-term supply recovery remains limited, and a supply gap still exists overseas. Domestic operating capacity is near its ceiling, output is unlikely to increase significantly, and imports are mainly fluctuating slightly. The destocking trend at home and abroad will not change, providing strong support for aluminum prices. After the holiday, a buy-on-dips approach is favored. Macro changes still need to be monitored.
Aluminum Alloy
Before the holiday, risk-aversion sentiment dominated the market, and aluminum alloy prices fluctuated lower. In the traditional peak season, the end-user market is improving marginally, and die-casting enterprise orders are increasing steadily, but the recovery is relatively slow. The operating rates of secondary aluminum alloy enterprises have generally changed little recently. Neither supply nor demand changes are obvious. Inventory changes for secondary aluminum alloy ingots are also not significant. In the short term, supply-demand fundamentals still lack strong drivers, and prices will continue to follow aluminum price fluctuations. Short-term buy-on-dips is recommended.
Zinc
During the domestic holiday period, overseas zinc prices fell first and then rebounded, recording a weekly decline. Before the holiday, risk-aversion demand caused domestic prices to weaken in a choppy range. Fundamentally, domestic smelting margins continued to shrink due to lower sulfuric acid prices, weaker processing fees, and declining sulfuric acid 80-20 profit-sharing returns, so production cut expectations remain. In overseas markets, the risk of a squeeze on LME zinc has not been resolved, and Singapore inventories continue to destock. At the same time, European natural gas prices have risen, smelting energy costs continue to climb, and expectations for winter production cuts in Europe have increased. However, peak-season consumption has fallen short of expectations, and overall end-user consumption is weak, which will cap the upside for zinc prices. Short-term zinc prices are expected to remain range-bound and adjusted.
Lead
During the domestic holiday period, overseas lead prices fell first and then rebounded, recording a weekly decline. Before the holiday, risk-aversion demand caused domestic prices to weaken in a choppy range. Recently, both domestic supply and demand have increased. Secondary lead enterprises maintain certain profits, and output has risen steadily. Maintenance at primary lead enterprises is about to end, and production is expected to resume later, so overall supply is likely to trend higher. In addition, the import window has recently opened, and imports are expected to increase later. Consumption remains relatively good, downstream battery enterprise finished-product inventories are being drawn down, and operating rates remain high. With both supply and demand rising and inventories falling, lead prices have downside support, but the pressure from high overseas inventories is relatively large, which may limit upside room. Short-term buy-on-dips on pullbacks is recommended.
Nickel/Stainless Steel
In September, mining operations at Eramet WBN restarted after obtaining authorization from Indonesian authorities. Indonesian nickel ore approvals partially resumed, and subsequent nickel ore supply increased, intensifying market concerns about pure nickel oversupply and causing nickel prices to continue falling. However, nickel prices have now fallen to low levels, and all pure nickel smelting processes have fallen into losses, so nickel prices face certain cost support on the downside. In addition, due to recent drought in Indonesia, production cut news has continued, and nickel prices have rebounded from the bottom. Nickel prices are expected to run in a range-bound manner going forward. Over the past two weeks, stainless steel ended its inventory buildup and saw a slight destocking, and stainless steel prices stabilized and rebounded. However, nickel ore approval volumes have increased, nickel iron supply has been revised upward, and nickel iron prices have recently fallen sharply, lowering stainless steel costs. In the short term, stainless steel prices lack drivers and are expected to follow nickel prices in range-bound trading.
Tin
During the domestic holiday period, overseas tin prices moved in a choppy range with little overall volatility. China's "Golden September and Silver October" has not yet ended, and overseas markets are entering the year-end stockpiling peak season, keeping short-term overall consumption relatively good. However, downstream and end-user enterprises remain highly sensitive to prices. On the supply side, although imports have increased somewhat, actual net imports are limited, domestic smelter operations have not changed significantly, and maintenance is expected later. Current domestic and overseas inventories are both at relatively low levels. Short-term macroeconomic uncertainty remains significant and is causing large disturbances to market sentiment, but fundamental support remains relatively strong. Short-term buy-on-dips on pullbacks is recommended.
Alumina
This week, alumina futures prices rose first and then fell, mainly reflecting capital flows. With new capacity coming online, domestic operating capacity rose again, and output hit a new high. Because downstream electrolytic aluminum operating capacity has increased very limitedly, growth on the alumina consumption side remains limited. Although net imports shifted to net exports, this has had little effect on alleviating domestic oversupply. Rising costs have widened losses for some alumina enterprises, but they still have no willingness to reduce production. Without large-scale production cuts, this situation will continue, inventories will keep climbing, and alumina prices will remain under pressure. In terms of operations, maintaining a sell-on-rebound approach is recommended. Attention should be paid to whether loss-making capacity cuts production later.
Risk Points
1. Repeated Middle East tensions stimulating another surge in crude oil prices. 2. Changes in expectations for the Federal Reserve's future interest rate policy. 3. U.S. copper tariff policy. 4. Domestic peak-season consumption falling short of expectations.
Copper
During the domestic holiday period, overseas copper prices fell first and then rebounded, recording a small weekly decline with little overall volatility. The market remained mainly influenced by macro factors. Earlier, concerns over continued Federal Reserve rate hikes persisted, and the U.S. dollar index strengthened sharply to a more than one-year high, pressuring copper prices. Later, U.S. September core CPI eased month on month, and non-farm payrolls then came in far below expectations, sharply reducing the probability of an October rate hike. The dollar index weakened, and copper prices rebounded but failed to recover their losses, as the probability of a December hike rose and the Middle East situation remained turbulent. The LME three-month copper price rebounded to around $14,400 per tonne. During the period, COMEX copper prices also fell first and then rose, but performed relatively stronger. Overseas spreads strengthened in a choppy manner during the period, with the LME copper cash contract moving from a $43 per tonne premium to around a $70 per tonne premium. LME copper inventories fell, with total inventories declining by 6,425 tonnes to 243,000 tonnes. COMEX copper inventories continued to rise, increasing by 3,450 tonnes. This week, the copper price spread between COMEX and LME was basically maintained above $200 per tonne. Before the holiday, domestic copper prices mainly fluctuated slightly, with the main contract moving around 110,000 yuan per tonne. Recently, domestic consumption has shown signs of recovery. Domestic copper inventories continued to destock, with Mysteel-tracked inventories falling below 80,000 tonnes. Exchange inventories fell by 8,403 tonnes to 38,700 tonnes. Before the holiday, domestic basis fluctuated and converged but remained at a large premium, with spot premiums narrowing from above 1,100 yuan per tonne to around 700 yuan per tonne. Currently, the CL spread remains positive, and the COMEX market continues to show a C structure. Market expectations for a U.S. copper tariff persist, and the probability of large-scale U.S. copper outflows is low. Due to global smelter production cuts caused by tight copper concentrate and scrap supply, as well as resilient global copper consumption supported by AI, the copper supply-demand imbalance has intensified. Currently, non-U.S. copper spot supply is severely tight, LME inventories continued to destock during the holiday, and domestic inventories are also at low levels. Spot tightness provides strong support and upward elasticity for copper prices. The non-farm payroll data released during the holiday fell short of expectations, reducing market rate hike expectations. However, oil price risks have not been resolved, and rate hike expectations still exist, so copper prices may still seesaw in the short term. If macroeconomic sentiment improves later, copper prices are still expected to return to strength amid spot tightness, and buying on dips can be considered.
Aluminum
During the holiday period, LME aluminum fell first and then rebounded. Earlier, the macroeconomic atmosphere was poor, with persistent rate hike concerns hanging over the market. The U.S. dollar index hit a more than one-year high, and concerns about overseas supply recovery also intensified bearish sentiment. The three-month aluminum price once fell below the $3,100 per tonne mark, touching a low of $3,091 per tonne. Later, U.S. inflation and non-farm payroll data came in below expectations, the probability of an October rate hike fell sharply, the dollar index retreated, and aluminum prices rebounded, but the rebound was limited. Worries about a second rate hike within the year still linger, as the Middle East outlook is unclear, high oil prices make inflation sticky, and expectations of overseas supply recovery also weigh on prices. Before the holiday, domestic aluminum prices weakened, with risk-aversion demand dominating the market. The SHFE aluminum main contract fell below the 24,000 yuan per tonne mark and closed below 23,900 yuan per tonne. However, pre-holiday destocking continued, and domestic social inventories fell to around 640,000 tonnes, basically returning to levels comparable with the same period in previous years. Aluminum billet inventories remained around 160,000 tonnes. During the period, LME aluminum inventories continued to decline, destocking by 11,800 tonnes in a week to 238,900 tonnes. Before the holiday, the domestic spot market maintained some activity. Stimulated by falling prices, some restocking behavior still occurred, and spot premiums strengthened accordingly, at one point reaching 80 yuan per tonne. However, as pre-holiday restocking ended, spot premiums narrowed to around 50 yuan per tonne. During the period, overseas cash contract premiums and discounts weakened in a choppy manner. At the beginning of the week, the LME cash contract was at a $10 per tonne discount, then weakened slightly to a $14 per tonne discount. China remains in the "Golden September and Silver October" peak season, and overall consumption remains relatively good. Overseas markets will also see pre-Christmas orders. Although Gulf region capacity is recovering and new capacity in Southeast Asia is coming online, short-term supply recovery remains limited, and a supply gap still exists overseas. Domestic operating capacity is near its ceiling, output is unlikely to increase significantly, and imports are mainly fluctuating slightly. The destocking trend at home and abroad will not change, providing strong support for aluminum prices. After the holiday, a buy-on-dips approach is favored. Macro changes still need to be monitored.
Zinc
During the holiday period, overseas zinc prices fell first and then rebounded. The market was mainly affected by macro factors. Earlier, concerns over continued Federal Reserve rate hikes persisted, and the U.S. dollar index strengthened sharply to a more than one-year high, pressuring zinc prices. The three-month zinc price once fell below $3,700 per tonne. Later, U.S. September core CPI eased month on month, and non-farm payrolls then came in far below expectations, sharply reducing the probability of an October rate hike. The dollar index weakened, and zinc prices rebounded, but the rebound was limited. The three-month zinc price recovered to around $3,760 per tonne. During the period, the LME zinc cash contract premium fluctuated and converged, from an earlier premium of $85 per tonne to within $40 per tonne. During the period, LME zinc inventories continued to rise, with total inventories increasing by 6,150 tonnes to 127,800 tonnes. Before the holiday, domestic zinc prices fluctuated lower, with risk-aversion sentiment dominating the market. The SHFE zinc main contract fell below 26,500 yuan per tonne. On the domestic supply side, zinc concentrate supply continued to decline, processing fees continued to fall, and sulfuric acid prices also dropped, continuously squeezing smelter profits and causing output to decline somewhat. However, consumption failed to improve further. During the holiday, some galvanizing and other zinc processing enterprises took holidays, and operating rates fell sharply. Pre-holiday inventories continued to decline. SMM-tracked data fell below 200,000 tonnes but remained at the highest level for the same period in previous years. Exchange inventories fell by 2,682 tonnes to 143,500 tonnes. Before the holiday, the domestic basis fluctuated repeatedly, with spot once shifting from a 95 yuan per tonne premium to a 30 yuan per tonne discount, but then quickly recovering to a 45 yuan per tonne premium. Domestic smelting margins continued to shrink due to lower sulfuric acid prices, weaker processing fees, and declining sulfuric acid 80-20 profit-sharing returns, so production cut expectations remain. In overseas markets, the risk of a squeeze on LME zinc has not been resolved, and Singapore inventories continue to destock. At the same time, European natural gas prices have risen, smelting energy costs continue to climb, and expectations for winter production cuts in Europe have increased. However, peak-season consumption has fallen short of expectations, and overall end-user consumption is weak, which will cap the upside for zinc prices. Short-term zinc prices are expected to remain range-bound and adjusted.
Lead
During the domestic holiday period, LME lead fell first and then rebounded, with macro factors dominating the market. The LME three-month lead price fell below $1,900 per tonne, touching a low of $1,874.5 per tonne, then rebounded to around $1,880 per tonne. Before the holiday, domestic lead prices fluctuated lower but not by much, mainly because fundamentals provided some support. Before the holiday, downstream battery enterprise inventories were further drawn down, end-user enterprise procurement increased, and battery enterprise operating rates also rose. This week, secondary lead enterprises maintained a certain profit level, and operating rates rose steadily. Maintenance at primary lead enterprises also neared its end. As restocking ended, pre-holiday domestic spot discounts weakened significantly, from a 105 yuan per tonne discount early in the week to within nearly 500 yuan per tonne later. This week, LME lead cash contract premiums and discounts weakened in a choppy manner, initially around a $35 per tonne discount and later weakening slightly to a $40 per tonne discount. Before the holiday, domestic lead ingot inventories continued to decline. SMM lead ingot social inventories fell below 50,000 tonnes, down by nearly 10,000 tonnes. Exchange inventories also declined, falling by 3,486 tonnes in a week to 56,000 tonnes. During the period, LME inventories continued to decline, destocking by 7,950 tonnes to 349,400 tonnes, but still at a high level. Recently, both domestic supply and demand have increased. Secondary lead enterprises maintain certain profits, and output has risen steadily. Maintenance at primary lead enterprises is about to end, and production is expected to resume later, so overall supply is likely to trend higher. In addition, the import window has recently opened, and imports are expected to increase later. Consumption remains relatively good, downstream battery enterprise finished-product inventories are being drawn down, and operating rates remain high. With both supply and demand rising and inventories falling, lead prices have downside support, but the pressure from high overseas inventories is relatively large, which may limit upside room. Short-term buy-on-dips on pullbacks is recommended.
Nickel
During the domestic holiday period, LME nickel fell first and then rebounded. The market remained mainly influenced by macro factors. Earlier, concerns over continued Federal Reserve rate hikes persisted, and the U.S. dollar index strengthened sharply to a more than one-year high, pressuring nickel prices. Later, U.S. September core CPI eased month on month, and non-farm payrolls then came in far below expectations, sharply reducing the probability of an October rate hike. The dollar index weakened, and nickel prices rebounded, but the rebound was limited. The LME three-month nickel price fell to a low of $15,510 per tonne, then rebounded to around $15,800 per tonne. During the period, LME nickel cash contract premiums and discounts fluctuated slightly, briefly narrowing from a $190 per tonne discount to a $180 per tonne discount, but later weakening again to a $198 per tonne discount. Before the holiday, SHFE nickel weakened. The main contract fell to around 122,000 yuan per tonne. Before the holiday, the market was dominated by risk-aversion demand. Although China was in the traditional peak season, the consumption side did not improve significantly, and the state of pure nickel oversupply and high inventories did not change. Before the holiday, SHFE nickel inventories continued to decline, falling by 584 tonnes in a week to 107,000 tonnes, still at a historical high. LME nickel inventories fell by 720 tonnes in a week to 284,000 tonnes, still at a high level. In September, mining operations at Eramet WBN restarted after obtaining authorization from Indonesian authorities. Indonesian nickel ore approvals partially resumed, and subsequent nickel ore supply increased, intensifying market concerns about pure nickel oversupply and causing nickel prices to continue falling. However, nickel prices have now fallen to low levels, and all pure nickel smelting processes have fallen into losses, so nickel prices face certain cost support on the downside. In addition, due to recent drought in Indonesia, production cut news has continued, and nickel prices have rebounded from the bottom. Nickel prices are expected to run in a range-bound manner going forward.
Tin
During the domestic holiday period, LME tin moved in a narrow range. Although macro headwinds weighed on prices, tin prices did not weaken along with other metals, partly supported by a rebound in the semiconductor index during the period. Later, the dollar index retreated from highs, but tin prices did not strengthen significantly. Instead, dragged down by weakness in the semiconductor index, they fluctuated weakly, with overall price volatility relatively small. The LME three-month tin price basically fluctuated around $54,000 per tonne. Recently, although there was no news-driven stimulus in overseas fundamentals, continued inventory declines provided support for prices. During the period, LME tin cash contract premiums and discounts rose first and then fell, at one point strengthening from a $155 per tonne discount to flat, but later returning to a $150 per tonne discount. Before the holiday, SHFE tin fluctuated weakly. There was risk-aversion demand before the holiday, but price fluctuations were small, with the main contract basically moving around 410,000 yuan per tonne. Fundamentally, peak-season consumption remained relatively good, but downstream and end-user enterprises remained highly sensitive to prices. Before the holiday, domestic inventories destocked again. SMM data showed that pre-holiday tin ingot inventories fell by 982 tonnes to 8,633 tonnes. Exchange inventories fell by 103 tonnes to 7,170 tonnes. LME tin inventories continued to decline, destocking by 155 tonnes during the period to 4,325 tonnes. China's "Golden September and Silver October" has not yet ended, and overseas markets are entering the year-end stockpiling peak season, keeping short-term overall consumption relatively good. However, downstream and end-user enterprises remain highly sensitive to prices. On the supply side, although imports have increased somewhat, actual net imports are limited, domestic smelter operations have not changed significantly, and maintenance is expected later. Current domestic and overseas inventories are both at relatively low levels. Short-term macroeconomic uncertainty remains significant and is causing large disturbances to market sentiment, but fundamental support remains relatively strong. Short-term buy-on-dips on pullbacks is recommended.
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