Base Metal Fundamental Outlook

Advisory Bazaar Info Services

🔹 Copper

The US July PCE Price Index rose 3.7% YoY, strengthening expectations of higher interest rates and pushing the US dollar higher. This weighed on copper prices. Meanwhile, uncertainty remains over the reported revenue-sharing agreement between Iran and Oman related to the Strait of Hormuz.

On the fundamental side, congestion at ports has slowed the arrival of imported copper, keeping spot supply relatively tight. However, high prices are weighing on downstream demand, with buyers mainly purchasing according to immediate requirements.

Outlook: Copper may remain mildly weak today.

🔹 Aluminium

The macro environment remains volatile, while uncertainty surrounding US-Iran talks continues. Falling aluminium ingot inventories in China are providing price support. However, rising production outside China, supported by new capacity and the resumption of operations, is expected to increase supply.

In the longer term, emerging sectors such as integrated circuits, aerospace, biomedicine, new energy storage and smart robotics could support aluminium demand. However, near-term peak-season demand remains uncertain.

Outlook: Aluminium may see weak consolidation within a limited range.

🔹 Lead

Supply remains constrained due to extensive smelter maintenance in major producing regions. Suppliers are holding firm at higher price levels, providing downside support to lead. However, elevated prices are keeping downstream buyers cautious, with many preferring long-term contract supplies.

Limited trading volumes are also reducing the scope for a strong upside move.

Outlook: Lead may trade sideways with a firm undertone at higher levels.

🔹 Zinc

Despite gains in LME zinc, prices witnessed a reversal at higher levels. LME inventories have increased, although most of the additional stocks moved into Hong Kong warehouses, while total inventories remain below 100,000 tonnes. Low inventories and regional supply imbalances continue to support zinc.

However, stronger-than-expected July PCE data increased expectations of a Fed rate hike next month, creating pressure on prices. SHFE zinc continues to find support around its moving averages.

Outlook: Zinc is likely to continue strong consolidation.

🔹 Tin

Following the US PCE data, the Dollar Index rose 0.29% to 99.19, putting pressure on precious and base metals and weighing on LME tin.

On August 26, LME tin inventories declined by 35 tonnes to 5,120 tonnes. Another source reported a 75-tonne decline to 5,155 tonnes. Falling inventories and a cancelled-warrant ratio of 12.61% indicate continued supply tightness. However, in the near term, a stronger dollar and macroeconomic pressure may remain dominant.

Outlook: Tin may remain under short-term pressure, while low inventories could provide downside support.