Base Metal Fundamental Outlook

Advisory Bazaar Info Services

Copper

The US expansion of sanctions on Iran and measures aimed at easing pressure on US Treasury yields initially supported the US Dollar Index, which later weakened. Copper prices followed a similar pattern, declining initially before recovering.

On the geopolitical front, reports suggest progress toward a ceasefire agreement between the US and Iran. However, Iran has refused to immediately reopen the Strait of Hormuz, keeping geopolitical uncertainty elevated.

Fundamentally, recent port congestion has slowed the arrival and warehousing of some imported copper, limiting near-term imported supply. At the same time, high prices continue to weigh on downstream consumption, with buyers largely purchasing only as needed.

Outlook: Copper is expected to trade with a mildly positive bias and limited volatility today.

Aluminium

Progress in US-Iran negotiations and plans to establish safer shipping routes through the Strait of Hormuz have eased some concerns over geopolitical risks.

On the fundamental front, continued declines in aluminium ingot inventories in China are providing downside support to prices. However, rising production from new and restarted capacity outside China is expected to keep average daily aluminium output increasing.

The SHFE/LME price ratio has improved. Export demand has softened month-on-month after existing orders were completed, although it remains relatively firm in the short term. In the domestic market, the transition from the off-season toward the peak season is yet to become clearly visible.

Outlook: Aluminium is expected to remain range-bound with subdued consolidation in the short term.

Lead

LME lead declined 0.76% overnight, forming a strong bearish candle, while SHFE lead posted only a marginal decline of 0.22%.

Spot supply remains relatively tight. Some suppliers continue to maintain firm prices, while others have temporarily withheld quotations. In addition, a sharp decline of 3,600 tonnes in LME inventories has provided downside support from the supply side.

Downstream buyers remain cautious and are purchasing mainly according to immediate requirements. Rising availability of imported lead is also weighing on demand, which could limit the scope for further price gains.

Outlook: Lead is expected to consolidate at elevated levels in the short term. Spot activity, imported lead arrivals and LME inventories will remain key factors to watch.

Zinc

LME zinc gained overnight, supported by various moving averages. Easing geopolitical tensions in the Middle East and a softer US dollar provided additional support to prices.

SHFE zinc also posted strong gains, reaching a new high since February. However, there is still no clear improvement in China’s end-user demand, which could limit further upside in zinc prices.

Outlook: With support from LME zinc, SHFE zinc is expected to remain firm and consolidate at higher levels.

Tin

Tin outperformed most other base metals amid broad gains across the London base metals complex. Key drivers included reduced expectations of higher interest rates, geopolitical risk premiums and differences in the fundamentals of individual commodities.

Inventories outside China continue to decline. Low inventory levels combined with elevated cancellations have increased the potential for a short squeeze. SHFE warrants have also recovered.

Outlook: Despite the divergence between tight LME inventories and rising SHFE warrants, tin fundamentals remain supportive. Prices are expected to stay firm in the near term.