Everbright Futures: Nonferrous Metals Daily Report March 16

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Copper: Macro and Micro Weak, Copper Prices Pull Back

(Reported by Dapeng Zhan, Professional Qualification Number: F3013795; Trading Consultation Qualification Number: Z0013582)

1. Macro Overview: Overseas, the US Department of Labor announced that February CPI year-over-year remained at 2.4%, core CPI fell to 2.5% YoY, both in line with expectations, indicating inflation has not spiraled out of control due to previous oil price increases. However, markets are more focused on March data. The employment market still shows structural issues, with initial unemployment claims at 213,000, below expectations, indicating limited layoffs and contrasting with a sharp drop in non-farm payrolls. Geopolitically, the US-Iran conflict continues to escalate, the Hormuz Strait blockade crisis remains unresolved, and international oil prices keep rising, exerting ongoing influence on commodities markets. Domestically, China’s social financing increased by 2.38 trillion RMB in February, up 146.9 billion from the same period last year; RMB loans by financial institutions increased by 900 billion RMB, down 110 billion YoY; M1 and M2 grew by 5.9% and 9.0% YoY respectively, previous values were 4.9% and 9.0%.

2. Fundamentals: Regarding copper concentrates, domestic TC quotes fell to -60.9, highlighting ongoing tightness in copper concentrates, supporting the market fundamentals. Refined copper production in March is estimated at 1.1952 million tons, up 4.6% MoM and 6.5% YoY, slightly recovering from February. Imports: China’s net refined copper imports in December decreased by 48.44% YoY to 201,800 tons, a cumulative YoY decline of 15.21%; December scrap copper imports increased by 14.81% MoM to 239,000 tons, up 9.88% YoY, with a cumulative YoY increase of 4.12%. Inventory: As of March 13, global visible copper stocks increased by 16,000 tons to 1.487 million tons; LME stocks rose by 27,500 tons to 311,825 tons; COMEX stocks decreased by 5,709 tons to 536,731 tons; domestic refined copper social inventories decreased by 0.33 million tons to 573,900 tons, bonded zone stocks decreased by 0.28 million tons to 64,200 tons. Demand: Copper prices weakened, downstream orders are recovering, and purchasing sentiment has increased.

3. Views: With the escalation of US-Iran tensions, the market mainly believes that geopolitical risks will negatively impact the global economy, leading to a sharp decline in overseas financial markets, expectations of weakening demand, and liquidity concerns, which pressure copper prices downward. Additionally, the reversal of the US-London copper price spread and the downward shift in the spread’s center of gravity raise concerns about increased stockpiling in London due to outflows of US copper inventories. However, the market is not entirely bearish; the currently very low TC/RC costs have widened the losses for smelters, potentially triggering expectations of reduced production and limiting further price drops. Meanwhile, China is approaching the traditional April peak season, with downstream cable and air conditioning companies ramping up production, and the replenishment of demand is expected to accelerate after copper prices fall, aiding domestic inventory reduction. In the short term, support levels are around 90,000–100,000 RMB/ton. If domestic and foreign stockpiles decrease and spot discounts narrow, a light long position could be attempted to benefit from seasonal rebounds. But if geopolitical conflicts continue to escalate, macro risks may persist, and copper prices should remain cautious.

Nickel & Stainless Steel: Rising Costs, Macro Drag

(Reported by Zhu Xi, Professional Qualification Number: F03109968; Trading Qualification Number: Z0021609)

1. Supply: For nickel ore, Indonesia’s nickel ore premium remains at $40/wet ton, Philippines 1.5% nickel ore premium rose by $4.5/ton to $15/wet ton. For nickel pig iron, domestic factories and traders maintain firm quotes, mostly above 1100 RMB/nickel (ex-factory/ship bottom including tax); Tsingshan’s high-nickel pig iron bid is 1070 RMB/nickel (ship bottom including tax); Indonesian ferro-nickel transactions are around 1120 RMB/nickel (delivered including tax). MHP: affected by landslides in February, four wet-process smelting projects (QMB, Meiming, ESG, Green-Eco) in the park are temporarily shut for maintenance; about 30% of Indonesia’s wet-process capacity is halted, recent transaction coefficients have increased.

2. Demand: In new energy, March is expected to see a 14% MoM increase in ternary precursor production to about 90,000 tons; ternary material output is projected to rise 19% MoM to 84,360 tons. According to CAAM data, from Feb 1-28, retail sales of passenger cars nationwide totaled 1.034 million units, down 25.4% YoY and 33.1% MoM. New energy vehicle retail sales in February were 464,000 units, down 32.0% YoY; January-February combined sales were 1.06 million units, down 25.7%. For stainless steel, weekly futures prices are roughly stable, with the spread widening to 155 RMB/ton, and premium for delivery goods slightly decreasing. Mainstream social inventories across China are 1.142 million tons, down 0.66% WoW; 300 series inventory decreased by 0.9 thousand tons to 707,000 tons; March crude steel production was 3.6335 million tons, up 32.69% MoM and 3.46% YoY.

3. Inventories: LME stocks decreased by 2,760 tons to 284,658 tons; Shanghai nickel stocks increased by 2,894 tons to 56,462 tons; social inventories rose by 2,953 tons to 87,490 tons; bonded zone stocks remain at 2,200 tons.

4. Views: Nickel ore prices continue to strengthen amid tight supply and rising shipping costs, with weekly nickel pig iron quotes and transactions also rising. However, primary nickel stocks surged significantly MoM, indicating pressure. Indonesia’s quota tightening causes supply disruptions, with expectations of additional quotas in July. Despite large inventory pressure on primary nickel, current rising costs suggest short-term opportunities to buy near cost levels, but macro risks warrant caution.

Aluminum & Aluminum Alloys: Short-term Tightness, External Strength, Internal Weakness

(Reported by Wang Heng, Professional Qualification Number: F3080733; Trading Qualification Number: Z0020715)

Weekly aluminum oxide futures are oscillating mildly stronger, closing at 2,956 RMB/ton on the 13th, up 4.4% WoW. Shanghai aluminum futures are also mildly strong, closing at 24,960 RMB/ton, up 1%. Aluminum alloys fluctuate slightly higher, closing at 23,655 RMB/ton, up 1.6%.

1. Supply: According to SMM, aluminum oxide operating rates decreased slightly by 0.05% to 77.08%. Shanxi and Guizhou continue to reduce load, while Henan factories gradually resume after maintenance. For electrolytic aluminum, conflicts in the Middle East persist, with Qatar’s Norsk Hydro halting production, Bahrain Aluminum suspending supply, and Mozambique’s aluminum plant facing potential shutdown due to unresolved power contracts; Mt. Holly’s 50,000-ton capacity is expected to restart by Q2 after idling since April. Iceland’s aluminum plant plans to resume full capacity by late July. Domestic and Indonesian projects are ramping up production, with March’s capacity utilization expected to rise 12.9% MoM to 4.43 million tons, and output up 4.3% YoY to 3.875 million tons, with the aluminum water ratio falling to 64.4%.

2. Demand: During the “Golden March” period, various sectors’ operating rates continued to recover, with average processing plant utilization up 2.4% to 61.9%. Breakdown: aluminum wire/cable up 2% to 65%; aluminum sheet/coil up 1% to 70%; aluminum foil steady at 72.9%; aluminum profiles up 7.3% to 51.8%. Recycled aluminum alloy utilization increased by 2.5% to 58.8%. Processing fees for aluminum rods in Baotou remain stable; in Xinjiang, Henan, Linyi, Wuxi, and Guangdong, fees decreased by 50–250 RMB/ton; overall, aluminum rod processing fees are stable.

3. Inventories: Exchange stocks increased by 7,813 tons to 274,000 tons; Shanghai aluminum stocks increased by 2,894 tons to 41,640 tons; LME stocks decreased by 11,600 tons to 44,500 tons. Social inventories: aluminum oxide increased by 8,000 tons to 188,000 tons; aluminum ingots increased by 38,000 tons to 1,294,000 tons; aluminum rods decreased by 12,000 tons to 386,000 tons.

4. Views: Domestic producers are substituting shutdowns with stockpiling to cope with losses; overseas, aluminum oxide raw materials are diverted from the Middle East due to strait blockages, narrowing the import profit margins and supporting prices. Accelerated registration of warehouse receipts and rising inventories suggest a shift from strength to weakness. As Middle Eastern oxide inventories bottom out, production cuts may impact UAE aluminum, further tightening supply and triggering a “rush for aluminum” overseas. Re-emergence of warehouse risks boosts external prices, while domestic accumulation and slow demand limit gains, establishing an external-strong internal-weak pattern. Domestic funds await a turning point signal. Notably, aluminum rods are leading the de-stocking trend, with a near-term rally expected. Geopolitical developments remain critical; close attention is needed on US-Iran conflict progress and downstream consumption.

Industrial Silicon & Polycrystalline Silicon: Bottom Adjustment, Awaiting Policies

(Reported by Wang Heng, Professional Qualification Number: F3080733; Trading Qualification Number: Z0020715)

Industrial silicon futures oscillated mildly weaker during the week, closing at 8,675 RMB/ton on the 13th, down 0.17% WoW; polycrystalline silicon futures were slightly stronger, closing at 42,040 RMB/ton, up 2.25%. Spot prices varied: No. 553 oxygen increased by 50 RMB/ton to 8,800 RMB/ton; No. 553 oxygen steady at 9,000 RMB/ton; No. 421 decreased by 100 RMB/ton to 9,600 RMB/ton.

1. Supply: According to Baichuan, weekly industrial silicon production increased by 250 tons to 66,300 tons; operating rate rose by 0.38% to 25.38%; furnace count increased by 3 to 202. In Northwest China, Xinjiang’s furnace operation remained stable; Shaanxi shut down 1 furnace; in Southwest China, Yunnan and Sichuan each added 2 furnaces, totaling 13 in operation. No other major changes.

2. Demand: Polycrystalline silicon P-type prices decreased by 30,000 RMB/ton to 38,000 RMB/ton; N-type decreased by 40,000 RMB/ton to 43,500 RMB/ton. Downstream procurement remains cautious due to uncertain raw material prices. New silicon wafer orders have stalled; price hikes are difficult to sustain, and price reductions or promotions may dominate. Organic silicon prices remain stable at 14,000–14,300 RMB/ton. The Ningbo conference indicated that organic silicon companies will implement phased reductions (35% total), with monthly reductions of at least 30%. Orders for monocrystalline factories are scheduled into March; new price increase orders are being received, but downstream resistance to high prices persists, leading to potential price softening. Weekly polycrystalline silicon output decreased by 330 tons to 19,000 tons; DMC output fell by 100 tons to 41,900 tons.

3. Inventories: Exchange stocks: industrial silicon increased by 5,700 tons to 109,900 tons; polycrystalline silicon increased by 10,200 tons to 320,700 tons. Social inventories: industrial silicon decreased by 15,300 tons to 437,400 tons; ingots increased by 3,800 tons to 1,294,000 tons; aluminum rods decreased by 1,200 tons to 386,000 tons.

4. Views: Production resumption in Xinjiang is hindered, offsetting small recoveries in Southwest China; rising costs of petroleum coke and electricity prices in Xinjiang support costs. Downstream demand remains adequate, but willingness to increase inventory is limited. The market shows narrow fluctuations, with spot prices stabilizing at the bottom. Polycrystalline silicon prices are gradually trending lower. Major producers plan to restart some capacity in March, with supply tightening easing. Inventories continue to shift into warehouse receipts, alleviating factory stockpiles. Downstream wafer procurement remains subdued, with short-term stabilization expected. Market awaits policy signals from the Two Sessions to boost photovoltaic industry confidence, possibly triggering bullish sentiment.

Lithium Carbonate: Weakening Contradictions, Volatile Adjustment

(Reported by Zhu Xi, Professional Qualification Number: F03109968; Trading Qualification Number: Z0021609)

1. Supply: Weekly production increased by 836 tons to 23,426 tons, including spodumene lithium extraction up 620 tons to 14,534 tons; lepidolite lithium extraction up 105 tons to 2,937 tons; salt lake lithium extraction up 20 tons to 3,495 tons; recycled lithium extraction up 91 tons to 3,460 tons. March is expected to see a 28% MoM increase in lithium carbonate production to 106,390 tons.

2. Demand: Weekly ternary cathode material output increased by 406 tons to 16,924 tons; inventory rose by 208 tons to 18,019 tons. Lithium iron phosphate (LFP) production increased by 5,050 tons to 101,725 tons, with inventory up 5,251 tons to 105,780 tons. March demand forecast: ternary cathode materials up 19% MoM to 84,360 tons; LFP up 24% to 430,000 tons. End-user data from CAAM shows February retail sales of passenger vehicles at 1.034 million units, down 25.4% YoY and 33.1% MoM; new energy vehicle retail sales in February were 464,000 units, down 32.0% YoY; January-February total 1.06 million units, down 25.7%. Conventional fuel vehicle retail sales in February were 570,000 units, down 19%. According to Dadong Think Tank, energy storage project cell prices range from 0.36 to 0.43 RMB/Wh, with the lowest up 1.3% and the highest up 14.7% WoW; EPC project prices range from 0.511 to 0.999 RMB/Wh, with the lowest down 35.1% and the highest down 32.6%; storage system prices from 0.499 to 1.193 RMB/Wh, with no reference for WoW. Leading companies’ quotes are converging with centralized procurement prices.

3. Inventories: Weekly social lithium carbonate inventory decreased by 414 tons to 98,959 tons; downstream increased by 1,890 tons to 45,647 tons; other segments decreased by 1,120 tons to 37,020 tons; upstream decreased by 1,184 tons to 16,292 tons.

4. Views: On the supply side, Zimbabwe’s shipments remain uncertain, with recent declines offset by increases elsewhere; on demand, cathode material production remains active, but delayed data reflect early-year digestion pressure, limiting market confidence; on inventory, weekly depletion continues, with total inventory turnover days dropping to 27.8 days. The overall inventory decline and increasing downstream stocking coefficients support prices. However, the market currently shows no obvious contradictions, and short-term prices are expected to fluctuate. More definitive bullish signals are needed to confirm a trend reversal, but low-price positions can be considered for accumulation. Attention should also be paid to developments in Zimbabwe.