Copper: Demand Concerns Lead to Retreat After Rally (Zhan Dapeng, Practitioner ID: F3013795; Trading Advisory ID: Z0013582) 1. Macro. Overseas, the U.S. December CPI grew 2.7% year-on-year, in line with expectations and the previous value; the core CPI grew 2.6% year-on-year, matching the previous value but slightly below the expected 2.7%. The slower-than-expected core inflation has fueled expectations for subsequent Fed rate cuts, although the probability of a January rate cut remains low. Significant divergence persists within the Fed regarding the future rate cut path; the Kansas City Fed President stated there is currently no justification for cutting rates, suggesting it could hinder inflation control progress and offer no benefit to the labor market. In other news, Fed Chair Powell is under criminal investigation by the U.S. Department of Justice, prompting joint statements from several central banks in support of Powell, collectively responding to the Trump administration's use of judicial pressure to threaten central bank independence. Domestically, the People's Bank of China announced a 0.25 percentage point cut in the interest rates of various structural monetary policy tools. 2. Fundamentals. Copper concentrate TC quotes remain at historically low levels, sustaining concerns about tight supply and providing strong fundamental support. Refined copper production is estimated at 1.1636 million tons in January, down 1.2% month-on-month but up 14.7% year-on-year; tight concentrate supply has led some smelters to conduct maintenance ahead of schedule, resulting in a slight output decline. Imports: Net refined copper imports in November fell 58.16% year-on-year to 161,700 tons, with a cumulative year-on-year decrease of 11.14%; scrap copper imports increased 5.87% month-on-month to 208,100 metal tons, up 19.94% year-on-year, with a cumulative increase of 3.51%. Inventory: As of January 16th, global visible copper stocks increased by 76,000 tons from the previous count (9th) to 1.037 million tons; LME inventory rose by 4,600 tons to 143,575 tons; Comex inventory increased by 22,602 tons to 492,523 tons; domestic refined copper social inventories rose by 47,100 tons weekly to 320,900 tons, while bonded area inventory increased by 1,200 tons to 80,000 tons. Demand: Rising copper prices have made downstream procurement more cautious, with transactions primarily driven by immediate needs. 3. View. Precious metals trends continued to influence nonferrous market sentiment this week, with copper showing strength amid export rush expectations. However, as domestic rate cuts and other policies were implemented, concerns grew about the sustainability of policy-driven rallies. Additionally, domestic consumption has entered a slack season, with copper demand weakening and inventory accumulation stronger than in recent years, increasing industry divergence. Short-term, based solely on current industry conditions and fundamentals, there is room for adjustment. Yet, continued capital support for copper makes a sustained downturn unlikely; overall, a slightly bullish, range-bound trend is expected before the Spring Festival. Strategically, maintaining a buy-on-dips approach is advised, but excessive chasing of highs should be avoided.
Nickel & Stainless Steel: Indonesia Quota Tightening Weighs on Sentiment (Zhu Xi, Practitioner ID: F03109968; Trading Advisory ID: Z0021609) 1. Supply. Refined nickel production in January is expected to increase 18.5% month-on-month to 37,200 tons; Chinese NPI production is projected to fall 1% month-on-month to 21,000 nickel tons, while Indonesian NPI output is estimated to drop 2% month-on-month to 139,100 nickel tons; nickel sulfate production is forecast to decline 1% month-on-month to 34,550 nickel tons. 2. Demand. New Energy: Intermediate product discount coefficients remain stable, but spot prices have strengthened with LME prices, and trading activity has increased. January production schedules for ternary precursors and materials declined month-on-month, with weekly ternary material output also weakening; a sequential drop in new energy vehicle sales further dampens power battery consumption expectations. Stainless Steel: Rising NPI and ferrochrome prices have supported costs, with price increases driving inventory destocking and a rebound in production schedules. 3. Inventory. LME inventories increased by 942 tons weekly to 285,732 tons; SHFE nickel stocks rose by 13 tons to 41,985 tons; social inventories grew by 2,464 tons to 63,510 tons, while bonded area inventory remained at 2,200 tons. 4. View. News: Indonesia will adjust its nickel quotas based on industry needs, with reductions aimed at supporting domestic mineral prices; similar measures are expected to support nickel prices, though 2026 quota levels were not disclosed, reiterating adjustments to meet local smelter demand. Fundamentally, rapid price increases have strengthened product prices across the supply chain, but performance is diverging: stainless steel continues destocking, while new energy demand drags. Furthermore, a significant 18.5% month-on-month increase in primary nickel production to 37,200 tons may pressure prices due to hedging demand. Recent market sentiment has cooled, with broad nonferrous metals consolidation. Short-term, Indonesian policy supports may make nickel relatively resilient, but expectations for further quota releases this year and potential primary nickel inventory pressure warrant caution. Prices face upside resistance; consider buy-on-dips opportunities near cost lines.
Alumina, Primary Aluminum & Aluminum Alloy: Sentiment Cools, Stockpiling Begins (Wang Heng, Practitioner ID: F3080733; Trading Advisory ID: Z0020715) Alumina futures trended weakly, with the main contract closing at 2,751 yuan/ton on the 16th, down 3.2% weekly. SHFE aluminum also weakened, with the main contract settling at 23,925 yuan/ton, a weekly drop of 1.71%. Aluminum alloy futures followed suit, with the main contract closing at 22,735 yuan/ton, down 1.1% for the week. 1. Supply. According to SMM, the alumina operating rate increased 0.1% weekly to 80.8%, as Shanxi plant maintenance concluded. Primary aluminum: Indonesia is ramping up production, while domestic projects in Xinjiang and Inner Mongolia are gradually starting operations; daily aluminum output remains high. SMM estimates January domestic metallurgical alumina operating capacity at 88.82 million tons, with output of 7.49 million tons, down 0.4% month-on-month and 1.2% year-on-year; January domestic primary aluminum operating capacity rose to 44.1 million tons, with output of 3.98 million tons, up 3.1% month-on-month and 7.7% year-on-year; the molten aluminum ratio fell to 75.1%. 2. Demand. Downstream pre-holiday stockpiling has begun, with the average operating rate of processing enterprises rising 0.2% weekly to 60.2%. By segment: aluminum cable held steady at 59.6%; aluminum sheet/plate increased 1% to 66%; aluminum foil rose 0.7% to 71.4%; aluminum profiles fell 0.9% to 47.9%. Secondary aluminum alloy held steady at 58%. Aluminum billet processing fees were stable in Wuxi, up 80 yuan/ton in Xinjiang and Guangdong, but down 20-60 yuan/ton in Baotou, Henan, and Linyi; aluminum rod processing fees were mostly stable, with a 50 yuan/ton increase in Henan. 3. Inventory. Exchange inventories: Alumina stocks rose 17,200 tons weekly to 141,000 tons; SHFE aluminum increased 42,100 tons to 185,900 tons; LME stocks fell 9,750 tons to 490,000 tons. Social inventories: Alumina rose 7,000 tons to 237,000 tons; aluminum ingots increased 22,000 tons to 736,000 tons; aluminum billets grew 36,500 tons to 206,000 tons. 4. View. The impact of the rainy season on Australian mines is emerging, while Guinea shipments remain stable; negotiated prices for imported ore continue to fall towards $60/ton. High ore reserves persist, with alumina plants showing no procurement intent; inventories at plants and downstream continue to accumulate, pressuring prices lower. Overseas geopolitical tensions have eased, and the U.S. has delayed tariffs on some key minerals, leading to a rational correction of previously overheated sentiment. Domestic downstream pre-holiday stockpiling has started, but the overall recovery is limited; aluminum ingot accumulation continues, and spot discounts have deepened. Short-term, aluminum prices may face a correction, but high-level support should provide resilience. Monitor downstream stockpiling progress and inventory trends.
Industrial Silicon & Polysilicon: Supply-Demand Imbalance Halts Rally (Wang Heng, Practitioner ID: F3080733; Trading Advisory ID: Z0020715) Industrial silicon futures weakened this week, with the main contract 2605 closing at 8,605 yuan/ton on the 16th, down 1.26% weekly; polysilicon also trended lower, with the main contract 2605 settling at 50,200 yuan/ton, a weekly decline of 2.14%. Spot prices held steady: 553 without oxygen remained at 8,950 yuan/ton, 553 with oxygen held at 9,400 yuan/ton, and 421 was stable at 9,900 yuan/ton. 1. Supply. According to BaiChuan, weekly industrial silicon output fell by 1,860 tons to 78,400 tons; the weekly operating rate dropped 0.88% to 27.8%, with the number of operating furnaces down by 7 to 221. Northwest China: Xinjiang started 2 new submerged arc furnaces, while Gansu shut 1; total operating furnaces in the northwest reached 178. Southwest China: Sichuan shut 5 furnaces, Yunnan saw no changes; total operating furnaces in the southwest were 14. Other regions: Fujian started 1 furnace, Inner Mongolia shut 3, Hunan shut 1; other areas were unchanged. 2. Demand. Polysilicon P-type held at 49,000 yuan/ton, N-type at 59,500 yuan/ton. Under regulatory and industry self-discipline requirements, polysilicon plants continue to reduce operating rates; downstream orders are shrinking with resistance to high prices. January orders are still under negotiation, with few actual deals, as focus remains on fulfilling previous orders; only low-inventory downstream firms are restocking. Organic silicon weekly prices rose 300 yuan/ton to 13,700-14,000 yuan/ton. Producers have coordinated staggered production cuts and unified price hikes; downstream buyers are stockpiling to hedge against future cost increases, significantly improving monomer plant order fulfillment, with some orders booked into February. Weekly polysilicon output fell 3,370 tons to 22,000 tons; DMC output dropped 400 tons weekly to 43,600 tons. 3. Inventory. Exchange inventories: Industrial silicon stocks rose 3,285 tons weekly to 54,400 tons; polysilicon inventories increased 3,900 tons to 136,800 tons. Social inventories: Industrial silicon fell 3,900 tons to 454,000 tons, with plant stocks down 3,900 tons to 267,000 tons. Huangpu Port held at 59,000 tons, Tianjin Port at 80,000 tons, Kunming Port at 52,000 tons. Polysilicon social inventories rose 8,500 tons to 316,800 tons. 4. View. Most furnaces in the southwest have shut down except those with captive power or integrated supply, while Xinjiang restarts after maintenance, offsetting supply reductions. Downstream production cuts have halted the industrial silicon rally. Polysilicon faces supply-demand imbalance pressure and anti-monopoly regulatory scrutiny, shifting market focus from speculation to fundamentals; strong pricing support for silicon material is unsustainable. Recent export tax rebate cancellations spurred a surge in overseas orders, significantly easing module production pressure, but accumulated raw materials at the wafer stage prevent this from reaching the polysilicon segment; crystalline silicon production cuts will likely expand. Short-term, futures lack rebound momentum and may trade flat; spot quotes, losing support, are expected to converge towards futures prices.
Lithium Carbonate: Capital Disturbance Intensifies (Zhu Xi, Practitioner ID: F03109968; Trading Advisory ID: Z0021609) 1. Supply. Weekly output increased by 70 tons to 22,605 tons: spodumene-based production rose 165 tons to 14,124 tons; lepidolite output fell 20 tons to 2,936 tons; salt lake-based production decreased 40 tons to 3,145 tons; recycled material-based output dropped 35 tons to 2,400 tons. 2. Demand. Weekly ternary material output fell 418 tons to 17,635 tons, with inventories down 204 tons to 18,257 tons; weekly LFP output decreased 68 tons to 87,026 tons, with stocks down 204 tons to 95,890 tons. Terminal: According to the CPCA, from January 1st to 11th, retail sales of new energy passenger vehicles in China reached 117,000 units, down 38% year-on-year and 67% month-on-month; cumulative retail sales this year fell 38%. Wholesale of new energy vehicles by manufacturers was 167,000 units, down 30% year-on-year and 51% month-on-month; cumulative wholesale fell 30%. 3. Inventory. Weekly lithium carbonate social inventories fell 263 tons to 109,679 tons: downstream stocks dropped 888 tons to 35,652 tons; other segments decreased 720 tons to 54,300 tons; upstream stocks rose 1,345 tons to 19,727 tons. 4. View. Weekly futures showed a strong-then-weak pattern due to capital flows, with weighted open interest falling 50,000 lots to 827,000 lots by Friday's limit-down; the main contract's 5-day gain narrowed to 1.94%. Weekly data indicated slight lithium salt destocking, but nonferrous sector correction and weaker-than-expected NEV sales dampened sentiment. However, the sequential slowdown in early-year NEV sales was largely anticipated after last year's front-loaded consumption; actual demand requires monitoring of battery orders and cathode production schedules. Currently: First, price increases for raw materials like copper, aluminum, and lithium have not yet triggered significant negative feedback from end-users. Second, export tax rebate adjustments may spur export rush activity, and some consultancies have revised up LFP cathode production schedules for January. Third, inventory structure shows downstream turnover days falling to around 9 days, suggesting price drops could stimulate spot procurement and stockpiling; Friday trading data indicated a significant increase in downstream transaction volumes, with basis slightly strengthening. Although lithium salt fundamentals are not weak, short-term pressure from sentiment and capital flows remains high. Persistent price declines could release spot liquidity; monitor calendar spreads/basis trends to validate Q1 demand. Consider right-side opportunities.
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