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In the Shanghai copper market, reports emerged yesterday suggesting US copper tariffs could stall. This quickly reversed earlier expectations of a US copper premium and structural tightness in non-US regions, driving a sharp correction in copper prices. On the macro front, stronger-than-expected US PPI data lifted rate hike expectations, pushing the dollar index back above 99. In terms of supply and demand, tightness at the mine level remains difficult to change, and the medium-to-long-term trend of tightening supply and demand is expected to continue. However, in the short term, if US copper tariffs fail to materialize, copper that previously flowed into the US could potentially flow out, easing global structural tightness in the near term. Attention should still focus on the CL price spread recovery and LME inventory changes. Overall, the long-term upward trajectory for copper remains intact, but the rapid shift in tariff expectations combined with prices at elevated levels creates short-term downward pressure.
In the Shanghai aluminum market, expectations around US copper tariff policy triggered a substantial drop in copper prices, pulling the entire non-ferrous complex lower, with aluminum following suit. The European Central Bank's rate hike and stronger-than-expected US PPI reinforced tightening expectations, strengthening the dollar and US Treasury yields, adding to macro pressure. On the supply side, domestic operational electrolytic aluminum capacity remains stable, with LME aluminum inventories falling to a low of 244,000 tonnes. No significant supply increase is visible, and low inventories only provide support at the bottom. On demand, the traditional "Golden September" consumption season in China has seen downstream processing plants' operating rates rise steadily, new orders trending higher, and consumption continuing to show marginal recovery. Overall, last night's aluminum decline was driven by sector sentiment stemming from the copper tariff issue, but fundamentals still have low inventory support. We expect short-term range-bound trading, with attention on macro expectations and inventory changes.
In the alumina market, Middle East tensions remain unresolved, freight rates are holding at elevated levels, and Guinea's rainy season is not yet over, providing continued cost-side support to prices. Overseas, prices remain relatively firm due to supply disruptions. The inverted spread between domestic and overseas prices has deepened, providing some support to domestic prices, and export demand improvements warrant attention. However, domestic capacity remains at high levels, supply pressure is significant, and inventories are at elevated readings. Spot prices are steady, and without production cut expectations, upside pressure on prices remains.
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