The industrial metals market is currently experiencing a rare divergence between macroeconomic forces and fundamental supply-demand dynamics in recent years. Geopolitical 'black swan' events and rigid industrial constraints are creating an intense tug-of-war, reshaping the short-term pricing logic for the three major base metals: copper, aluminum, and zinc.
Copper: Historically Low TC Builds a Cost Floor, Range-Bound Amid Macro Disturbances
The tight global copper concentrate supply situation has surpassed the boundaries of previous cycles. Import spot Treatment Charges (TC) have plummeted to a historical extreme of -$128 per ton. This, combined with Kazakhstan's suspension of sulfur exports further squeezing wet-process copper production capacity, has created a rigid supply-side contraction that strongly supports the cost floor.
Even during the traditional low consumption season, structural demand resilience from power, new energy, and AI computing infrastructure continues to stand out. Inventory drawdowns in non-US regions are fully offsetting selling pressure driven by financial attributes such as a strong US dollar and stagflation expectations. Copper prices are currently consolidating within a narrow range of 102,000 to 104,000 yuan per ton, awaiting clearer policy signals from the release of the US Federal Reserve's June meeting minutes.
Aluminum: 9% of Global Supply Channel at Risk, Scarcity Logic Drives Bottom Recovery Amid Low Inventories
Geopolitical conflicts in the Middle East are directly constricting a key chokepoint in the global aluminum supply chain. Market concerns are rapidly escalating over potential disruptions to a supply channel accounting for 9% of global aluminum smelting flows. Institutions predict Middle Eastern aluminum output could plummet by 35% this year, leading to an annual supply-demand deficit of 930,000 tons.
Compounding this, domestic operating capacity in China is approaching the 45-million-ton policy red line, while LME aluminum inventories have fallen below the historical low of 300,000 tons. A tight supply-demand balance has been established on both fronts. Although downstream demand may be hesitant to chase prices higher during the off-season, spot aluminum still possesses upward momentum supported by rigid demand, with its trading range expected to hold between 22,700 and 23,200 yuan per ton.
Zinc: Losses at the Mine Level Force Production Cuts, Resilience Shines Through Amid Dual Supply-Demand Decline
Among the three major metals, zinc is most directly impacted by macro risk-off sentiment. However, domestic zinc mine TC has fallen to -600 yuan per ton, leading to expanding losses for smelters. Coupled with concentrated maintenance at overseas smelters, China's zinc output in July is projected to decline by 8.8% year-on-year. This rigid contraction at the mine level provides clear support against price declines.
Current demand is constrained by seasonal factors like high temperatures and heavy rainfall, leading to a slow pace of domestic demand recovery. The overall market shows a pattern of simultaneous supply and demand decline. Spot zinc prices are weakening slightly, with the core trading range for Shanghai zinc futures expected to be 24,400 to 25,000 yuan per ton.
Outlook and Risk Considerations
In the short term, developments in US-Iran tensions and marginal adjustments to US Federal Reserve monetary policy remain the core variables that could break the current stalemate. From a medium- to long-term perspective, incremental demand from the energy transition and AI computing infrastructure, combined with long-term supply rigidity in the mine sectors of these three metals, will build a solid foundation for long-term price support.
Regarding trading strategy, a range-bound approach is recommended. For copper, wait for macro risks to be fully priced in and for clearer bullish signals before positioning. For aluminum, the tight supply situation persists, making price dips opportunities for moderate buying. For zinc, the pattern of stronger external markets versus weaker domestic ones continues, with spot discounts persisting; treat it with a strategy of buying on dips. It is crucial to continuously monitor geopolitical developments and Federal Reserve policy moves to guard against macro tail risks.
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