An analysis of the latest price movements and market drivers for key industrial metals is provided.
Copper
Overnight, copper prices on both domestic and international markets exhibited a weak, consolidative trend, with the import window for Chinese refined copper closing. On the macroeconomic front, the US ISM Services PMI for May rose to a three-month high of 54.5, exceeding the forecast of 53.8 and the previous reading of 53.6. Increases in the new orders and business activity components point to resilient consumer demand. However, the Federal Reserve's Beige Book indicated persistent inflationary pressures, with rising energy costs being passed on, weakening consumer sentiment, and stable employment. The upcoming US non-farm payrolls data on Friday may offer further market direction. Geopolitically, while the US House passed a resolution to limit former President Trump's authority for military action against Iran and Kuwait closed its airspace following an Iranian attack, reigniting Middle East tensions, Trump has stated that negotiations with Iran are progressing "very well" and are "very close" to an agreement. Nonetheless, the issue of navigation through the Strait of Hormuz may persist until September. Regarding inventories, LME stocks decreased by 1,700 tonnes to 382,550 tonnes; Comex stocks increased by 108 tonnes to 582,567 tonnes; SHFE copper warehouse receipts fell by 2,238 tonnes to 96,391 tonnes, while BC copper receipts dropped by 777 tonnes to 10,806 tonnes. On the demand side, elevated copper prices are suppressing some purchasing activity. The back-and-forth nature of the US-Iran conflict is introducing volatility to copper's upward trajectory. Current information suggests that even if US-Iran talks progress, the Strait of Hormuz navigation problem may not be quickly resolved, implying that overseas sulfur shortages could remain a persistent supply-side disruption. Additionally, the high premium of US copper relative to LME copper is prompting arbitrage flows, which to some extent alleviates concerns over potential negative impacts from expected LME stockpile builds. Overall, copper prices may still be viewed as consolidating with a slightly stronger bias in the first half of the month, though expectations should be tempered. A potential shift in trend is possible in the latter part of the month due to volatility in overseas financial markets and the seasonal transition from peak to off-peak demand in China, warranting attention to trading timing.
Nickel & Stainless Steel
Overnight, LME nickel fell 2.06% to $18,820 per tonne, while Shanghai nickel declined 1.94% to 141,360 yuan per tonne. Inventory data shows LME stocks decreased by 1,104 tonnes to 274,236 tonnes, and SHFE warehouse receipts increased by 282 tonnes to 84,555 tonnes. In terms of premiums/discounts, the LME cash-to-3-months spread remains in contango, while the import nickel discount holds at -350 yuan per tonne. Supply is actively tightening. On one hand, an Indonesian mine has entered a maintenance phase due to quota issues; based on policy, some additional quota volumes may become available in the second half of the year, but this factor is more dependent on price levels. On the other hand, following the previous policy adjustment of HPM, nickel ore and sulfur prices have led to reduced operational loads at some Indonesian projects. On the demand side, June production schedules indicate ternary cathode material output is expected to be flat month-on-month, while stainless steel's nickel consumption is set for a slight decline. However, the pressure from accumulating Class-1 nickel inventories persists, and the projected drop in June electrolytic nickel production is not significant. Therefore, inventory pressure remains the core contradiction, as production cuts have not yet materialized in inventory drawdowns. Against a backdrop of policy support, active supply tightening, and high inventories, the market is still expected to trade within a range. Monitoring inventory changes for potential positive feedback and staying alert to the impact of shifts in broader market sentiment is advised.
Alumina, Primary Aluminium & Aluminium Alloy
Overnight, alumina prices traded weakly, with the AO2609 contract closing at 2,819 yuan per tonne, down 0.07%. Open interest increased by 4,338 lots to 319,000 lots. Primary aluminium prices on the Shanghai exchange also weakened, with the AL2607 contract settling at 24,385 yuan per tonne overnight, a drop of 1.14%. Open interest decreased by 2,581 lots to 282,000 lots. Aluminium alloy prices were weaker, with the main AD2607 contract closing at 23,105 yuan per tonne overnight, down 1.07%. Open interest decreased by 28 lots to 13,704 lots. In the spot market, SMM's alumina price fell to 2,679 yuan per tonne. The discount for aluminium ingot spot prices widened to 110 yuan per tonne. Foshan A00 aluminium was quoted at 24,320 yuan per tonne, at a 120 yuan per tonne discount to Wuxi A00. Aluminium billet processing fees were steady in Henan and Linyi, increased by 50 yuan/tonne in Baotou, and decreased by 20-70 yuan/tonne in Xinjiang, Nanchang, Guangdong, and Wuxi. Processing fees for aluminium rod (1A60 series) were steady, as were fees for 6/8 series rods, while fees for low-carbon 6/8 series rods increased by 128 yuan/tonne. The release of new alumina production capacity, coupled with ongoing concentrated arrivals of imported material, continues, while pickup rates from primary aluminium smelters remain slow, potentially accelerating inventory builds. This creates fundamental pressure on alumina. During the current window of uncertainty regarding Guinea's quota policy, taking a contrarian long position carries high risk. It is prudent to wait for policy clarity and for expectations to adjust before considering short positions. The US-Iran situation has seen renewed fluctuations, with Iran stating plans to completely block the Strait of Hormuz, leading the market to price in geopolitical risk premiums once more. Yunnan province in China is seeing some smelter restarts in June, while downstream demand is seasonally transitioning from peak to off-peak, with only battery cells and export demand providing resilience. As domestic and international inventory trends converge, there is room for the price spread to narrow slightly. Whether aluminium prices can sustain further gains going forward depends on whether macro sentiment releases signals of recovery and whether supply-side narratives regarding production restrictions gain traction, while also monitoring the pace of destocking during the off-season and changes in the overseas geopolitical situation.
Industrial Silicon & Polysilicon
On the 3rd, industrial silicon prices traded with a stronger bias. The main 2609 contract closed at 8,755 yuan per tonne, up 0.69% on the day, with open interest increasing by 6,316 lots to 266,000 lots. Baichuan's spot reference price for industrial silicon was 9,196 yuan per tonne, up 50 yuan from the previous session. The price for the lowest-grade deliverable product fell to 8,600 yuan per tonne, shifting the spot market from a premium to a 50 yuan per tonne discount. Polysilicon prices were weaker. The main 2606 contract closed at 36,605 yuan per tonne, down 3.46% on the day, with open interest rising by 6,518 lots to 101,400 lots. The adjusted standard for the lowest deliverable grade was lowered to 31,000 yuan per tonne, resulting in a spot discount of 5,605 yuan per tonne. Rising costs for silicon coal and petroleum coke, linked to coking coal prices, have increased production costs for industrial silicon, leading some southwest producers who planned restarts for late May to postpone. However, recent electricity tariff reductions in the southwest may help offset this cost pressure. As inventories shift from producers to traders and continue to accumulate, the dual pressure of high warehouse receipts and social stocks caps upside potential, while support is found near the full production cost line in the southwest. In mid-June, leading polysilicon manufacturers are scheduled to resume feedstock operations, making supply pressures fully apparent. Insufficient batch procurement from end-users, combined with pressure from hedging activity and the reality of high inventories, is weighing on futures prices. Following the concentrated expiry of May contract warehouse receipts, selling pressure from silicon producers and traders may exert significant downward pressure on the June contract, making it difficult for polysilicon plants to sustain previous price-supporting strategies. Recent photovoltaic exhibitions have not yielded new supply-demand developments, and the polysilicon market is experiencing a correction as previous expectations fade. A cautious approach is warranted while awaiting further developments, with vigilance for high volatility in futures prices driven by both credible and speculative news.
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