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Weekly Base Metal Macro Economic Slides

By: Natalie Scott-Gray, Senior Metals Demand Analyst, EMEA and Asia region

Weekly Base Metal Macro Economic Slides

Key Takeaways: 

  • Market Overview & Price Trends
    • Highlighted the ongoing summer lull in base metal markets, with prices lacking momentum (excluding tin). 
    • Price direction likely to centre around the US dollar and expectations of a September rate cut.
    • Discussed the upcoming seasonal demand period in China, especially for construction-related metals like zinc, aluminium, and copper, and anticipated monetary easing measures such as interest rate or reserve requirement cuts in Q4.
  • Fundamental Analysis by Metal
    • Copper: Tight fundamental balance expected in September, with focus on China’s peak consumption season and its impact on inventory levels. 
    • Aluminium: Demand remains suppressed due to high prices, but a rebound is expected with the start of the construction season in Q4 in China. 
    • Zinc: Chinese inventories have reached a five-month high, with limited domestic supply and weak downstream consumption. LME low inventory levels are providing some price support. Maintenance in China and demand pickup could offer tailwinds for prices in the coming weeks.
    • Lead: Significant increase in LME inventories caused downward price pressure last week, but this was mostly reversed. Indian lead smelters applying for LME delivery registration could increase supply. Overseas lead concentrate availability in China, remains tight, supporting prices.
    • Nickel: Short-term prices expected to remain weak.
    • Tin: LME Cash-3M backwardation at its highest level since mid-July.
  • Trade Tensions & Geopolitical Developments
    • Addressed Trump’s renewed tariff threats on countries with digital services taxes, specifically targeting the EU.
    • Noted increased cooperation between Canada and the EU, including security partnerships and agreements on critical minerals (copper concentrate, rare earths, lithium), suggesting Canada may reconsider its strategic reliance on the US.
    • Highlighted rising US tariffs on Indian goods (up to 50%), with a three-week exemption for goods already shipped. Most Indian exporters cannot absorb such increases, and key sectors like steel, aluminium, and copper are exempt due to existing tariffs.
    • Emphasized the importance of the upcoming Shanghai Cooperation Organization meeting, with India’s Prime Minister visiting China for the first time in seven years, and potential for further geopolitical tensions and tariff threats from Trump.
  • Macroeconomic Updates
    • China: Industrial production profit declines have slowed, supported by high-tech sector gains, but overall demand remains weak and deflationary pressures persist. High-frequency data shows activity continues to decline, especially in property sales, automotive, and home appliances.
    • US: Focused on Powell’s Jackson Hole speech, which hinted at a September rate cut but offered little forward guidance. The Fed’s framework now allows more flexibility, including employment running above estimates without risking price stability. The dollar initially sold off but recovered, with attention now on the upcoming core PCE deflator release, expected to show the hottest reading since February.
    • Yield curves in the US are steepening due to future inflation expectations if rate cuts occur.
    • Russia/Ukraine: No meeting planned between leaders; Trump threatens further sanctions on Russia, adding to risk-off sentiment.
    • Europe: Germany’s Q2 GDP shows recession concerns, with a downward revision and two consecutive quarters of decline possible.
  • Key Events to Watch
    • China: Shanghai Cooperation Organization meeting and PMI readings on the 31st, with manufacturing expected to remain in recession.
    • Europe: ECB inflation expectations, with a possible modest pullback in the one-year reading; next rate cut likely in December.
    • US: Core PCE deflator release on Friday, expected to support the dollar.
  • Base Metals

This material should be construed as market commentary and represents the opinions and viewpoints of the author, and does not reflect tailored advice associated with any specific account.


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