Copper: Consensus Shortage, Hidden Surplus (Zhan Dapeng, Practicing License No.: F3013795; Trading Advisory License No.: Z0013582)
1. Although macro conditions fluctuated in the third quarter, continuously deteriorating TC, supply-side contraction expectations, and regional supply-demand imbalances caused by US refined copper trade arbitrage kept the center of copper prices firmly on an upward trajectory. Standing at the threshold of the fourth quarter, the core contradiction for copper prices may shift from the industrial supply-side narrative of "mine-side scarcity, smelter production cuts, inventory migration" to the variable of "how the global inter-regional supply-demand imbalance created by US refined copper tariff expectations will be reverse-corrected." The current global copper market's "extreme spot tightness in non-US regions and deeply distorted LME back structure" is not a true reflection of supply-demand fundamentals, but rather a structural illusion manufactured by policy-expectation-driven inventory relocation. Once tariffs are implemented or policy direction becomes clear, the pricing logic may switch from "rush shipping, stockpiling and arbitrage" to "bullish factors materializing and inventory flowing back," and the collapse of the trade arbitrage mechanism could push copper prices toward a correction.
2. First, tariff expectations have created the current "non-US shortage." From July 2025, the US imposed a 50% tariff on copper semi-finished products while temporarily exempting refined copper, with plans to levy a 15% import tariff on refined copper from 2027 and raise it to 30% by 2028. COMEX copper has maintained a persistent high premium over LME copper, causing cross-market arbitrage annualized returns to far exceed normal trade profits. According to IHS Markit data, US copper import arrivals exceeded 200,000 tons in July, the highest monthly level since records began in 2014. Rough estimates indicate that since 2024, US imports of copper and copper products have exceeded normal years by more than 1.45 million tons, and COMEX copper inventory has accumulated approximately 670,000 tons since 2024, which implies that US hidden copper inventory could be equally staggering. Meanwhile, deliverable copper inventory in non-US markets has been systematically drained, with LME copper inventory halving from approximately 400,000 tons in May to around 250,000 tons, while domestic social inventory (including bonded) fell to the 100,000-ton level. The LME cash-to-three-month spread once spiked dramatically; the squeeze pressure on near-dated contracts did not stem from a surge in real consumption, but from a severe shortage of deliverable inventory.
3. Second, if tariffs are implemented, the price spread between the two regions may widen rapidly in the short term, but the trade arbitrage driver may reverse. Once the executive order is signed, the tariff rate, effective date, and exemption conditions will all be quickly "priced in," and the market's trading focus will shift from "US copper stockpiling" to "how much copper has the US already stockpiled, and how will this inventory be handled." In both January and September 2026, spread contraction and reversal occurred within short periods, and LME copper inventory also saw sustained increases from low levels on both occasions, with the impact on absolute prices being self-evident. Once tariffs are implemented, US monthly copper imports will plummet from the 200,000-ton level in July, and combined with excessive hidden inventory, the pressure to release inventory will multiply.
4. Finally, once inventory flows back, it will deal a blow to the LME pricing system. The LME will face supply shocks from two directions simultaneously: first, registered copper warrants in US warehouses, once canceled, can be shipped directly to LME Asian or European warehouses for delivery; second, hidden inventory hoarded in the US will also seek liquidation paths as the arbitrage logic disappears. LME pricing will shift from "squeeze premium" back to "surplus pricing." Of course, this process will not happen overnight, because inventory relocation has time lags—from COMEX warehouse cancellation, shipping and transportation to re-registration in LME warehouses typically takes several weeks to two months, meaning that fourth-quarter copper price declines are more likely to exhibit a gradual decline rather than a cliff-edge drop, but the market will trade "inventory return expectations" in advance. Of course, if the White House ultimately decides to cancel or indefinitely postpone refined copper tariffs rather than implement them as planned, the arbitrage logic collapse will come faster, and its bearish effect will be more severe than "implementation." Finally, it should be noted that the medium-to-long-term supply-demand contradiction for copper has not reversed, which means that mine-side supply constraints will limit the downside depth of copper prices and cannot reverse the direction.
Nickel & Stainless Steel: Weak Supply-Demand, Watch Policy (Zhu Xi, Practicing License No.: F03109968; Trading Advisory License No.: Z0021609)
1. Supply: New HPM and tax policy adjustments for nickel ore theoretically reduce hydrometallurgy costs by $18.5/wet ton, with policy correction of the theoretical and spot deviation bringing prices more in line with delivered prices. In the third quarter through mid-to-late September, Indonesia domestic laterite nickel ore 1.2% delivered prices fell 10%, and 1.6% delivered prices fell 16%; the latest 1.2% HPM price is $24.89/ton, and 1.6% HPM prices fell $3.44/ton to $63.2/ton; January-August China nickel ore cumulative imports increased 22% year-on-year to 31.622 million tons; port inventory fell 6% year-on-year to 9.12 million tons; refined nickel profits deteriorated and imports increased at lower prices, with domestic production growth rapidly slowing, Q1-Q3 domestic Class 1 nickel cumulative production increased 2% year-on-year to 306,000 tons; January-August cumulative exports fell 87% year-on-year to 15,000 tons, cumulative imports increased 20% year-on-year to 187,000 tons; Indonesia nickel ore quota and benchmark price adjustments led to stronger Indonesian nickel ore prices, Indonesian output declined, and driven by stronger prices, domestic profit recovery boosted production, with Q1-Q3 domestic ferronickel cumulative production increasing 12% year-on-year to 255,000 nickel tons, while Indonesia cumulative production fell 7% year-on-year to 1.167 million nickel tons; January-August cumulative imports fell 7% year-on-year to 6.683 million tons; affected by accidents, weather, costs and other factors, although MHP capacity is still being released, actual utilization rates remain low, with Q1-Q3 Indonesia MHP cumulative production falling 4% year-on-year to 313,000 nickel tons; January-August cumulative imports fell 10% year-on-year to 1.068 million tons; driven by profit-motivated production switching and new capacity commissioning, nickel matte production grew significantly year-on-year; Q1-Q3 Indonesia low-grade nickel matte cumulative production increased 50% year-on-year to 285,000 nickel tons, high-grade nickel matte cumulative production increased 79% year-on-year to 246,000 nickel tons; January-August nickel matte cumulative imports increased 46% year-on-year to 394,000 tons; new capacity ramp-up combined with increased ternary battery demand drove Q1-Q3 nickel sulfate cumulative production up 30% year-on-year to 318,000 nickel tons; January-August nickel sulfate cumulative imports increased 28% year-on-year to 205,000 tons.
2. Demand: On the new energy side, Q1-Q3 ternary precursor cumulative production increased 43% year-on-year to 911,000 tons, with 3-series, 5-series, and NCA series declining year-on-year while others grew; January-August cumulative exports increased 15% year-on-year to 54,000 tons; ternary material cumulative production increased 54% year-on-year to 760,000 tons, with 3-series, 5-series, and 8-series declining year-on-year while others grew; January-August cumulative exports increased 54% year-on-year to 112,200 tons, cumulative imports increased 72% year-on-year to 60,700 tons; ternary battery cumulative production increased 16% year-on-year to 334GWh, NCM installed capacity cumulative increased 11% year-on-year to 85.5GWh, exports cumulative increased 28% year-on-year to 83.4GWh; January-August new energy vehicle cumulative wholesale sales increased 9% year-on-year to 9.762 million units, of which retail fell 12% year-on-year to 6.673 million units, exports increased 134% year-on-year to 3.285 million units. On the stainless steel side, third-quarter stainless steel prices fell 7.1%, and the Shanghai nickel/stainless steel ratio rose by 0.44; third-quarter national mainstream market stainless steel 89-warehouse social total inventory increased by 29,000 tons to 1.15 million tons, of which 300-series decreased by 27,600 tons to 60,000 tons; Q1-Q3 stainless steel cumulative production increased 4% year-on-year to 30.7 million tons, of which 200-series increased 10% year-on-year to 8.86 million tons, 300-series increased 2% year-on-year to 16.16 million tons, 400-series increased 1% year-on-year to 5.68 million tons; January-August cumulative imports were flat year-on-year at 1.01 million tons, exports fell 14% to 2.9 million tons; overseas supply Q1-Q3 Indonesia stainless steel cumulative production increased 5% to approximately 3.8 million tons; quarterly profits weakened quarter-on-quarter; based on institutional inventory and production data, stainless steel apparent consumption for the first three weeks of January-September increased 13% year-on-year to approximately 30.04 million tons; as of August, real estate data for development investment, new construction starts, construction in progress, completions, sales value and sales area showed cumulative year-on-year changes of -19.9%, -24.8%, -12.8%, -23.7%, -13%, -12.1% respectively; elevator, escalator and lift cumulative production increased 1% year-on-year to 749,000 units; the three major white appliance categories cumulative sales fell 2% year-on-year, with domestic sales down 8% and exports up 3%; automobiles, industrial boilers, power generation equipment, metal smelting equipment, and civilian steel ships showed cumulative year-on-year changes of -4%, -18%, -6%, 5%, 42% respectively.
3. Inventory: In the third quarter, LME nickel inventory operated relatively stable at 278,000 tons compared to the end of the previous quarter, domestic Shanghai nickel warrant inventory grew to 108,000 tons, total social inventory decreased somewhat to 125,000 tons, and bonded zone inventory slightly decreased to 1,900 tons.
4. View: On the raw material side, ferronickel, nickel matte and MHP are still expanding slightly, but due to accidents, profit issues and other problems, total nickel consumption is essentially flat year-on-year at approximately 210 million wet tons, and extrapolating for the full year may require approximately 290-300 million wet tons, with ferronickel essentially flat year-on-year, nickel matte significantly increased, and MHP slightly decreased. On the new energy industry chain side, although the ternary segment's market share is narrowing, ternary precursor and material segments still maintain relatively fast growth, with pressure on the ternary side more likely to fall on ternary materials and ternary battery segments. On the stainless steel side, overall performance shows both supply and demand growing, with inventory down 3.3% from the year's high; based on institutional inventory and production data, stainless steel apparent consumption for the first three weeks of January-September increased 10% year-on-year to approximately 29.67 million tons; affected by policy, Chinese New Year, trade barriers, geopolitics and other issues, stainless steel exports slowed year-on-year but show a month-by-month recovery trend; terminal real estate data remains weak, elevator-related data turned positive year-on-year; automobile slightly declined year-on-year; white appliances are weak domestically but strong internationally, with overall growth slowing; metal smelting and civilian steel ship industries showed certain year-on-year growth. From the quota perspective, additional supplementary quotas in the second half led to essentially maintaining nickel ore balance for the year, but the smelting side remains in surplus; although somewhat improved compared to last year, overall visible inventory destocking remains insufficient, with LME and domestic nickel inventories still at relatively high levels; although quotas have narrowed, the effect on alleviating surplus pressure is modest, and the fourth quarter needs to focus on next year's quota approval situation. Risk warning: El Niño, power risks, Indonesia nickel ore policy.
Aluminum: Marginal Pressure Building, Rise Then Fall (Wang Heng, Practicing License No.: F3080733; Trading Advisory License No.: Z0020715)
In the third quarter, alumina futures oscillated weak, with the main contract closing at 2,687 yuan/ton as of September 24, an overall decline of 3.4%. Shanghai aluminum oscillated stronger, with the main contract closing at 24,200 yuan/ton, an overall gain of 7.2%. Aluminum alloy oscillated stronger, with the main contract closing at 23,745 yuan/ton, an overall gain of 5.37%.
1. Supply: On the alumina side, new capacity in Guangxi is gradually ramping up, and previously shut-down enterprises in Shanxi have fully resumed production. Overseas, Emirates Global Aluminium's alumina refinery and Brazil's Alunorte alumina plant have both restored normal production. On the electrolytic aluminum side, overseas restarts are accelerating, with Bahrain Aluminium's operating capacity in the Middle East recovering to approximately 1.3 million tons, UAE and Indonesia projects accelerating ramp-up, and Rio Tinto's 235,000-ton capacity in Canada starting restart. According to SMM, January-September domestic metallurgical-grade alumina production is estimated at 65.644 million tons, down 0.6% year-on-year, with operating capacity rising to 91.96 million tons and utilization rate rising to 77.3%. January-September domestic electrolytic aluminum production is estimated at 33.98 million tons, up 2.7% year-on-year, with operating capacity rising to 45.61 million tons, utilization rate rising to 98.7%, and aluminum-water ratio rising to 79.5%.
2. Demand: With the dual holiday approaching and peak season arriving, downstream stocking levels and operating rates overall recovered with structural differences. Third-quarter average operating rate was 60.98%, up 1.12 percentage points year-on-year, with aluminum plate and strip operating rates significantly improving, up 4 percentage points compared to the same period last year, while other segments saw operating rate increases within 1 percentage point; June-August downstream comprehensive processing PMI averaged 45.85, up 0.013 points year-on-year, with expected room for increase in September. Aluminum billet processing fees were lowered across the board by 150-620 yuan/ton; aluminum rod processing fees were lowered across the board by 450-675 yuan/ton.
3. Inventory: On the exchange inventory side, third-quarter alumina destocked 10,300 tons to 134,900 tons; Shanghai aluminum destocked 175,700 tons to 306,000 tons; LME destocked 62,300 tons to 241,400 tons. On the social inventory side, third-quarter alumina port inventory accumulated 75,000 tons to 966,000 tons; aluminum ingot destocked 400,000 tons to 678,000 tons; aluminum billet accumulated 32,500 tons to 149,000 tons.
4. View: Fourth-quarter alumina will stabilize first then weaken. In October, mine-side disruptions and rising sea freight continue to provide cost support logic. But with Shanxi restarts in late August combined with new capacity commissioning, fourth-quarter supply pressure will only increase. In November-December, if production cuts fall short of expectations, the trading logic will shift from cost support to year-end producers selling at low prices to recover cash flow. At the same time, since spot valuations are at historical lows, downside space is relatively limited, with weak oscillation dominating. Electrolytic aluminum in the fourth quarter may rise first then fall. After peak season effects, downstream operating rates seasonally recover, low inventory solidifies the price floor, and whether demand can exceed expectations will determine the upside space. Although Middle East aluminum plant restarts are faster than expected, the overseas supply gap will be difficult to fill within the year, and the pattern of strong domestic and weak overseas continues. After November, peak season gradually fades, and aluminum prices enter a correction phase. Uncertainty from macro factors such as US midterm elections and Federal Reserve rate hikes may trigger sharp rallies and selloffs. Key focus areas include Middle East geopolitical developments, peak season demand quality, and the Federal Reserve's rate hike path.
Industrial Silicon & Polysilicon: Expectation Verification, Focus on Rhythm (Wang Heng, Practicing License No.: F3080733; Trading Advisory License No.: Z0020715)
In the third quarter, industrial silicon futures oscillated stronger, with the main contract closing at 8,530 yuan/ton as of September 24, a quarterly gain of 1.73%. Polysilicon futures oscillated higher, with the main contract closing at 36,990 yuan/ton, a quarterly gain of 4.71%; spot prices were stable to slightly lower, with non-oxygen 553下调50 yuan/ton to 8,850 yuan/ton, oxygen 553下调50 yuan/ton to 9,050 yuan/ton, and 421 holding steady at 9,500 yuan/ton. Polysilicon N-type mixed packaging material上调8,650 yuan/ton to 39,400 yuan/ton, N-type re-feeding material上调8,300 yuan/ton to 40,900 yuan/ton.
1. Supply: According to Baichuan, January-September domestic industrial silicon total production reached 2.929 million tons, down 0.2% year-on-year, with quarterly furnace count decreasing by 35 to 218 units, and furnace utilization rate falling 3.4% to 28.4%. Main producing region shares: Xinjiang fell to 46.6%, Inner Mongolia rose to 13.4%, Gansu rose to 8.1%, Yunnan rose to 12.3%, Sichuan rose to 10%. Large-scale production cuts occurred at major Xinjiang plants, with new capacity in Inner Mongolia and Gansu and southwestern wet-season restarts filling the production gap.
2. Demand: January-September polysilicon production was 879,000 tons, down 7.13% year-on-year; January-September DMC production was 1.622 million tons, down 12.9% year-on-year; January-August aluminum alloy production was 12.354 million tons, up 2.6% year-on-year, with January-September aluminum alloy production estimated at 14.236 million tons. Estimated silicon consumption for organosilicon/polysilicon/aluminum alloy was 843,400/1,142,700/569,400 tons respectively; January-August industrial silicon cumulative net exports were 508,900 tons, up 5% year-on-year. Silicon material plants had almost no spot transactions, and wafer plants continued cautious procurement. The market is awaiting subsequent policy implementation and industry requirements. Recently, integrated manufacturers resumed production, with monthly scheduling increasing somewhat, still pending confirmation at the October production cut meeting. Organosilicon monomer plants again controlled volumes to support prices, driven by peak season stocking sentiment, downstream inquiry and procurement volumes recovered in stages. However, large-scale stocking has not yet appeared, and there is still resistance to high-priced货源.
3. Inventory: On the exchange side, third-quarter industrial silicon overall accumulated 6,740 tons to 166,300 tons, and polysilicon overall accumulated 34,100 tons to 76,800 tons. On the social inventory side, third-quarter industrial silicon accumulated 62,200 tons to 516,200 tons, of which plant inventory accumulated 56,100 tons to 311,700 tons; Huangpu Port held steady at 62,000 tons, Tianjin Port accumulated 4,500 tons to 86,000 tons, Kunming Port accumulated 1,600 tons to 56,500 tons. Polysilicon overall accumulated 23,000 tons to 319,000 tons.
4. View: Fourth-quarter industrial silicon will stabilize first then rise. After southwestern electricity prices rise in October, supply begins to contract. Current inventory is at historically high levels for the same period, still requiring significant silicon plant production cuts and downstream concentrated restocking in parallel. After November, the dry season cost center rises to support industrial silicon, southwestern production achieves complete cuts, and if polysilicon scheduling stabilizes, supply-demand rhythm misalignment could lead to a recovery rally. Polysilicon enters a policy strong expectation verification phase in the fourth quarter. During the October policy window, silicon material production cuts may fall short of expectations, wafer scheduling recovery is slow, the supply-demand scissors gap narrows slightly, but inventory has pressure buildup risk. In November-December, wafer scheduling continues to increase, and the industry sees staged destocking. At year-end, if energy consumption new standards and cost accounting are officially implemented, prices are expected to recover modestly along the cost line. High inventory and weak terminal demand are core risk points; focus on upstream production cuts and downstream production increase rhythms, as well as whether year-end module export rush or terminal installation improvement materializes.
Lithium Carbonate: Supply Changes, Demand Questions (Zhu Xi, Practicing License No.: F03109968; Trading Advisory License No.: Z0021609)
1. Supply: Adjusted global lithium resource supply for 2026 increases 26% year-on-year to 2.22 million tons LCE. Q1-Q3 lithium carbonate production increased 45% year-on-year to 1 million tons, of which spodumene lithium extraction increased 47% year-on-year to 557,000 tons, lepidolite lithium extraction fell 13% year-on-year to 122,000 tons, salt lake lithium extraction increased 72% year-on-year to 179,000 tons, recycling lithium extraction increased 84% year-on-year to 110,000 tons, and lithium slag lithium extraction increased 478% year-on-year to 33,000 tons.
2. Cathode Materials & Batteries: Q1-Q3 ternary materials increased 33% year-on-year to 760,000 tons, with high-nickel series growing faster while mid-to-low nickel showed varying degrees of decline; lithium iron phosphate increased 72% year-on-year to 4.359 million tons; lithium cobalt oxide fell 18% year-on-year to 71,000 tons; lithium manganese oxide fell 8% year-on-year to 97,000 tons; lithium battery cumulative production increased 69% year-on-year to 2,164GWh, of which ternary batteries increased 16% year-on-year to 334GWh, lithium iron phosphate batteries increased 84% year-on-year to 1,749GWh, and other batteries cumulative increased 74% year-on-year to 81GWh; lithium iron phosphate battery share rose 7pcts to 81%. On the vehicle side, domestic January-August new energy vehicle wholesale increased 9% year-on-year to 9.762 million units, retail fell 12% year-on-year to 6.673 million units, exports increased 134% year-on-year to 3.285 million units; average annual battery capacity increased 15kwh year-on-year to approximately 70kwh, with wholesale-caliber actual lithium battery demand increasing over 35% year-on-year to 535GWh; under broad European data, H1 2026 new energy vehicles increased 32% year-on-year to 2.35 million units, with penetration rate rising an average of 3pcts, of which BEV increased 35% year-on-year to 1.61 million units and PHEV increased 28% year-on-year to 740,000 units; US auto sales fell 2% year-on-year to 9.26 million units, and under policy influence, new energy vehicle cumulative sales fell 26% year-on-year to 665,000 units, with penetration rate falling 2pcts to 7.2%, of which BEV cumulative sales fell 25% year-on-year to 539,000 units and PHEV fell 32% year-on-year to 127,000 units. On the energy storage side, January-August energy storage cumulative tender capacity increased 108% year-on-year to 518.7GWh, winning bids increased 59% year-on-year to 394.2GWh, and January-July installations increased 7% year-on-year to 71GW.
3. Inventory: The current largest sample lithium salt inventory exceeds 150,000 tons, of which upstream accounts for 21%, cathode accounts for 28%, traders account for 39%, and battery cells account for 12%. Lithium carbonate current social inventory should actually be at ~200,000+ tons; based on balance sheet extrapolation, inventory turnover days are declining, and Q4 is expected to continue destocking by approximately 30,000-35,000 tons, but the destocking pace may gradually slow. On cathode material inventory, affected by slowing ternary battery demand, ternary material inventory pressure, while somewhat alleviated compared to the first half, should not be underestimated, while lithium iron phosphate inventory days continue to decline. On the power battery side, inventory turnover days have slightly rebounded since mid-year but remain at relatively low levels for the year; for energy storage batteries (considering system export amplification factors), fitted through winning bid volumes, inventory turnover days show a pattern of increase then decrease.
4. View: In mid-to-late September, inventory continued to destock but spot performance remained insufficiently strong, combined with persistent远期 weak expectations weighing on the market; under the combined effect of market alpha and beta risks, lithium prices accelerated downward. For the fourth quarter outlook, on the supply side, Zimbabwe arrivals, Australian mine restarts, and domestic new mine ramp-ups may bring incremental supply, while attention should be paid to whether climate issues disrupt South American production/shipping rhythms and whether Zimbabwe lithium mine policies change. On the demand side, although cathode scheduling continues positive growth, battery-side scheduling was downgraded in September, and fourth-quarter growth may also slow, possibly caused by a combination of auxiliary material supply tightness and demand negative feedback. However, in the context of this year's export rush, although the power market maintains its base, the incremental energy storage market faces fragility due to low domestic installations + long overseas project cycles + unknown system export conditions, compounded by leading enterprise scheduling downgrades, further dampening market sentiment; and in the longer term, capacity regulation policies will also suppress远期 market scale and growth space. From the fourth quarter to the first half of next year, on one hand, attention should be paid to whether lithium salt plants will undergo maintenance and production cuts as prices fall; on the other hand, lithium mine supply risks may gradually feed back into the spot market (Zimbabwe, Jiangxi, South America). If the basis continues to strengthen and supply disruptions create supply-demand mismatches, lithium prices are expected to stabilize/rebound, but given that demand expectations are inherently difficult to confirm or refute, price upside will be limited; however, if negative feedback emerges, prices will continue to decline further. Risk warning: Macro sentiment, supply disruptions, demand negative feedback.
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