Nonferrous Metals Sector: Phased Risks Await Release

During the domestic Qingming Festival holiday, overseas non-ferrous metals generally declined, led by copper prices. Yesterday marked the first trading day after the Qingming Festival, with the most-traded domestic futures contracts experiencing widespread declines, particularly in the non-ferrous metals sector, including copper, tin, and nickel. From the perspective of global capital markets, although the non-ferrous metals sector was affected by US tariff policies, price fluctuations were primarily driven by market sentiment. The author believes that the fundamentals of various non-ferrous metal varieties differ significantly, and after the release of sentiment, the market will return to fundamental logic.

Copper: Since the US initiated the Section 232 investigation on copper, arbitrage trading on the LME and COMEX had driven global copper prices higher. With the news that the US might impose tariffs on copper earlier than expected, coupled with the unexpected implementation of "reciprocal tariffs," copper prices became the leading decliner in the sector. The current adjustment in copper prices mainly reflects market concerns, as the specific tariff policies have not yet been implemented, and the actual impact is limited.

It is worth noting that the global supply of copper concentrates remains tight, and the recycling of copper scrap is still constrained. The pressure on raw materials has been transmitted to the smelting sector through processing fees. Data shows that the processing fees for imported copper concentrates have remained negative for several consecutive months. Although some domestic smelters have announced maintenance, sentiment-driven declines will further exacerbate industry pressure.

Additionally, the continuous rise in copper prices after the Chinese New Year has suppressed downstream procurement demand. This price correction is expected to stimulate end-user restocking and drive a recovery in consumption. Overall, the short-term adjustment in copper prices is unlikely to persist, and the long-term tight supply-demand situation will support price recovery.

Lead: Recently, lead prices have shown a pattern of initially jumping and then pulling back. From a fundamental perspective, high scrap battery prices and the high operating rate of lead-acid batteries continue to provide support on both the cost and demand sides, suggesting a potential for a short-term rebound in lead prices.

Specifically, in terms of primary lead, with the commissioning of new overseas mines and seasonal resumption of domestic production, the supply of lead concentrates has gradually increased. However, due to the by-product revenue model, the growth in primary lead production is limited. For secondary lead, the supply of scrap batteries has entered the off-season, and rising prices have compressed smelting profits. However, imported crude lead may compensate for the raw material gap, and the actual production cuts may be less than expected.

On the demand side, lead-acid batteries have entered the traditional off-season, with dealers being cautious in restocking and corporate orders showing a downward trend. Overall, lead prices may experience a technical rebound in the short term, but medium-term support may weaken, and the market is expected to fluctuate downward.

Zinc: Similar to the lead market, the zinc market has a short-term need for a rebound after overcorrection. However, unlike lead, with the resumption of production at overseas mines such as Tara and Kipush, the supply of zinc concentrates in China has significantly improved since Q1, with rapid accumulation of port and smelter inventories. On the smelting side, the rebound in processing fees has improved corporate profits, and the easing of raw material supply has gradually been transmitted to zinc ingot supply. However, demand-side performance has fallen short of expectations, with downstream enterprise inventories at historically high levels and smelter finished product inventories continuing to accumulate, leading to a phase of market surplus. After a short-term rebound, zinc prices are expected to return to a fluctuating downward trend.

Nickel: The main suppliers of nickel are Indonesia, the Philippines, and Russia, while the main importers include China, the US, and the EU. In the medium to long term, the nickel market maintains a supply surplus, and the negative impact of tariff policies on indirect demand has intensified market concerns.

In detail, nickel ore prices remain firm, with rising premiums and discounts on Indonesian base prices, and the impact of the rainy season in the Philippines continues. Refined nickel remains in surplus, with low price spreads between domestic and overseas markets. Nickel iron demand is supported by the MoM increase in stainless steel production schedules, but industry supply pressure is increasing. Nickel sulphate has shown strength due to the cobalt export ban in the DRC, driving profit recovery for nickel salt smelters. Overall, under macro bearish pressure, nickel prices will maintain bottom fluctuations.

(Source: Futures Daily)