Base Metal Fundamental Outlook

Advisory Bazaar Info Services

🔶 COPPER

On the macro front, the US-Iran conflict continued to escalate, with Trump threatening to “hit Iran hard,” increasing geopolitical risks around the Strait of Hormuz. Trump also said that interest rates are too high but that he respects Warsh’s decisions. Meanwhile, Treasury Secretary Bessent expects oil prices to decline and the conflict to be resolved.

On the fundamental front, available cargoes remained tight, with suppliers holding prices firm and the overall supply situation continuing to remain constrained. On the demand side, purchases were mainly focused on just-in-time procurement, with limited willingness among buyers to chase higher prices. However, expectations of month-start restocking provided some support to demand.

On the inventory front, as of Monday, August 31, SMM copper inventories across major regions in China fell by 12,100 mt WoW to 102,100 mt, compared with 132,100 mt during the same period last year.

Tight mine supply, scarce spot-market cargoes, the approaching traditional peak season, and expectations of downstream restocking provided support to copper prices, resulting in a sharp overnight rise.

Outlook: Copper prices are expected to consolidate at higher levels with a mildly subdued bias today.

🔶 ALUMINIUM

On the macro front, the Jackson Hole Central Bank Symposium delivered hawkish signals. Fed Chairman Warsh adopted a hawkish tone in his debut remarks, while ECB officials leaned toward a September rate hike. Rising expectations of tighter global liquidity weighed on market sentiment and put pressure on aluminium prices.

However, continued destocking in China and expectations of the approaching September peak season are providing solid support to aluminium prices on the downside.

With bullish and bearish factors continuing to coexist, aluminium prices are expected to remain in a high-level consolidation phase.

Outlook: Aluminium prices are likely to consolidate at elevated levels, with downside support remaining intact.

🔶 LEAD

Overnight, SHFE lead fell sharply. Spot inventories increased marginally, while downstream buyers remained cautious at elevated price levels, resulting in resistance for lead prices.

However, maintenance at delivery brands, low factory inventories, and limited domestic supply have prompted suppliers to hold prices firm, providing downside support.

Outlook: Spot lead prices are expected to retreat from higher levels today, but the decline is likely to remain limited due to firm supplier pricing. Overall, lead prices are expected to consolidate at elevated levels with a subdued bias.

Key Levels/Factors to Watch: The 16,000 level, LME lead trends after the market reopens, and the sustainability of suppliers’ firm pricing will remain important.

🔶 ZINC

Overnight, LME zinc remained closed, while SHFE zinc formed a strong bullish candlestick. A notable decline in domestic zinc ingot social inventories improved market sentiment, while increased bullish positioning pushed the SHFE zinc price center higher.

Outlook: Zinc prices are expected to consolidate on a firm note during the day.