The market has misjudged the war; oil, copper, and aluminum inventories are at rock bottom, and a "turning point" for commodities is approaching!

The core contradiction in the commodity markets is shifting from "whether prices have risen too much" to "how long inventories can mask supply-demand gaps." Zhongtai Securities believes the market may underestimate the delayed impact of the US-Iran conflict on oil, copper, and aluminum supply and demand; Guotai Haitong Securities emphasizes that the metal market will enter a structurally driven main rising phase after adjustment, with the key not in overall price increases, but in re-selecting varieties with limited supply and incremental demand.

In a June 2 nonferrous metals weekly report, Liu Yang of Zhongtai Securities and others stated that there are currently two market illusions: first, the US-Iran war has not caused large-scale supply-demand gaps in oil, copper, aluminum, and other commodities; second, the momentum behind commodity price increases may have exhausted itself. The agency believes that after June, as diplomacy remains stalled, nuclear issues are hard to resolve, and military friction escalates, the market may usher in a "turning point."

The most direct signal comes from inventory and spot premiums. Zhongtai Securities states that global oil inventories may fall to the lowest level since 2017, LME aluminum spot premiums have risen to $95/ton, surpassing the March 2022 record, approaching a 20-year high. The copper side faces combined impacts from mine disruptions, falling smelting fees, and improved demand structure, which restricts the downside space of prices.

Guotai Haitong Securities analyst Li Pengfei's mid-term metals strategy offers another main thread: divergence in metal trends is expanding. Gold depends on central bank purchases, ETF inflows, and US interest rate paths; copper relies on power, AI data centers, and US supply chain policy; aluminum depends on electrolytic aluminum profit and new energy demand; rare earths, tungsten, tin, and cobalt are more constrained by supply. In other words, the so-called "market shift" does not mean all metals rise together, but is a structural revaluation driven by inventory, policy, and demand.

What the market underestimates is not the conflict itself, but the repricing after inventory buffers disappear

Zhongtai Securities believes that last week US-Iran negotiation outlook swung back and forth: Trump claimed negotiations with Iran were progressing well, then Iran condemned the US for violating the ceasefire agreement, and the White House denied the memo revealed by Iranian media. Although no formal agreement has been reached, market trading has already tilted towards a ceasefire actually taking place.

This forms a gap in expectations. The conflict not immediately causing commodity supply interruptions does not mean supply-demand contradictions do not exist. Zhongtai Securities points out, just before the conflict, certain aluminum produced in the Middle East was shipped to the US, masking real aluminum tightness with inventory. As inventory cushions continue to be consumed, supply-demand gaps in oil, copper, and aluminum may move from expectations to actual pricing.

Such pricing is usually not linear. When inventory is high, geopolitical risk may be quickly digested by the market; after inventory declines, supply disruptions of the same scale may be amplified by spot premiums, processing fees, and regional price spreads. The LME aluminum spot premium at a nearly 20-year high is an early signal of this process.

Aluminum: Spot premium warns first, export demand brings volume-price elasticity

Aluminum is one of the commodities where the two research reports overlap most clearly. Zhongtai Securities believes, LME aluminum spot premiums continue to rise, indicating persistent supply tightness in the European market. As of May 28, 2026, LME aluminum spot premium stands at $95/ton, possibly a new high since January 25, 2007, nearly 20 years.

Domestic exports also reinforce this logic. Customs data shows China’s aluminum exports grew significantly in April. Zhongtai Securities calculates that as of April 2026, cumulative exports of unwrought aluminum and aluminum products reached 2.05 million tons, up 9.04% year-on-year, and up 40.41% month-on-month. The agency believes China’s electrolytic aluminum and aluminum processing companies may see simultaneous increases in volume and price in their exports.

Guotai Haitong Securities adds, from an industrial chain perspective, that alumina and bauxite are no longer the tightest links. In 2026, bauxite port inventory gradually grows, January-April bauxite import dependence stands at 79%, Guinea’s bauxite imports up 18.9% year-on-year. Alumina utilization rates are down, prices are low, showing upstream raw material tightness has eased.

True elasticity lies in electrolytic aluminum and new demand. Domestic electrolytic aluminum operating capacity and utilization remain high, per-ton aluminum profits exhibit resilience. The total built capacity of electrolytic aluminum in the Middle East is 7.136 million tons, output 7.005 million tons, showing high utilization of low-cost overseas capacity. On the demand side, the real estate chain is still a drag, but new energy vehicles, solar installations, and energy storage systems bring new aluminum use cases, including battery aluminum foil, casing, battery trays, connectors, liquid cooling plates, cables, and energy storage containers.

Copper: Mining tightness limits downside, AI and power grid reshape demand curves

Copper’s logic is more complex. In the short term, macro variables still suppress copper price. Zhongtai Securities says US inflation expectations rising, rate hike expectations heating up, and US Treasury yields rising may keep copper price in oscillation.

But supply side provides support. Zhongtai Securities figures show this week, Chinese copper smelters’ rough refining fee TC fell to -$106.2/thousand tons, down 24.17% week-on-week, refined fee is -10.62 cents/lb. Sulfur prices remain historically high, rising sulfuric acid prices may transmit to overseas copper smelters, increasing marginal output reduction worries. Chile’s major copper mine output in March fell year-on-year, Peru issued “Energy Crisis Emergency Decree,” Zambia’s Q1 copper output dropped 4.27% y-o-y.

Guotai Haitong Securities defines copper as switching from cyclical metal to policy metal. US tariffs and supply chain policies are changing copper’s pricing framework. From August 1, 2025, semi-finished copper and “high-strength copper derivatives” face a 50% tariff; refined copper is mainly under a 15% global temporary tariff. The report hypothesizes: if by mid-2026 US domestic capacity is not significantly restored, a tiered tariff on refined copper could be launched January 1, 2027, first stage 15%, increased to 30% in 2028.

More importantly, copper is now part of critical mineral and data center supply chain discussions. Ministry of Commerce’s evaluation includes AI data center copper busbars and liquid cooling system components. Copper is no longer just a building, appliance, or traditional industrial metal, but a foundational part of electrical infrastructure and AI hardware.

The supply-demand table shows copper is almost without redundancy. Guotai Haitong Securities forecasts global refined copper supply will grow from 28.53 million tons in 2025 to 29.229 million in 2026, 30.719 million in 2027, 32.117 million in 2028; global copper usage rises from 28.55 million in 2025 to 29.47 million in 2026, 30.72 million in 2027, 32 million in 2028. From 2025 to 2027, supply and demand run close to balance.

Demand structure is also shifting. Power copper usage proportion is forecast to rise from 45.48% in 2025 to 47.56% in 2028; data center copper usage rises from 315,500 tons in 2025 to 689,400 tons in 2028, proportion from 1.11% to 2.15%. Construction and appliance copper continue decreasing.

Gold: Rates still matter, but no longer the sole pricing variable

Gold pricing is also changing. Zhongtai Securities believes interest rates are not the whole story for gold pricing. Since the US-Iran conflict, gold has shown an obvious negative correlation with oil due to liquidity shock. Some countries face short-term fiscal pressure, forced to sell gold reserves for liquidity; but the People's Bank of China increased gold purchases in March when prices were falling, supporting gold prices’ medium and long-term trend upward.

Rising US inflation expectations have lowered market expectation for Fed rate cuts this year, short-term financial property of gold is under pressure. But Zhongtai Securities believes, in the medium term, gold’s commodity properties will benefit from inflation, and uncertainty in the dollar’s reserve currency value continues to support gold’s monetary property revaluation.

Guotai Haitong Securities’ data further shows gold’s support is no longer only from rate cut trades. 2025 total gold supply is 5,002 tons, demand also 5,002 tons. Jewelry manufacturing demand drops from 2,027 tons in 2024 to 1,638 in 2025, high prices depress consumption; investment demand jumps from 1,181 tons in 2024 to 2,175 in 2025, of which gold ETF and similar products go from -6 tons in 2024 to 801 in 2025.

Central banks and official institutions remain major gold buyers. 1,082 tons in 2022, 1,051 in 2023, 1,089 in 2024; forecast to fall to 863 in 2025, but still well above most years 2010-2021. Guotai Haitong Securities believes ETF inflows and central bank gold buying are driving up the gold price floor.

Minor metals: Supply constraint more crucial than demand spikes

Guotai Haitong Securities believes the more price-elastic segment is in rare earths, cobalt, tin, tungsten, and lithium. These varieties are characterized by a relatively small market size and hard supply constraints—once demand is revised up or inventory drops, price reacts more strongly.

For rare earths, the key is not single demand booms but slowing quota growth. From 2021 to 2023, quota growth for domestic rare earths mines was 20.0%, 25.0%, 21.4%; quota growth for smelting/separation was 20.0%, 24.7%, 20.7%. By 2024, mining quota growth declines to 5.9%, smelting/separation quota to 4.2%. 2025 rare earth imports fall year-on-year.

Demand keeps rising. China’s NEVs demand for NdFeB magnets is forecast to rise from 69,148 tons in 2025 to 84,866 in 2026, 103,008 in 2027; industrial robotics demand for NdFeB from 18,817 tons in 2025 to 28,226 in 2026, 40,927 in 2027. Supply-demand balance for China’s PrNd oxide is forecast -2,917 tons in 2025, -3,306 tons in 2026, expanding to -9,664 tons in 2027.

Tin shortages are even more continuous. Global tin supply-demand balances are -17,600 tons in 2025, -17,700 in 2026, -12,700 in 2027, -15,300 in 2028. Though the absolute gap is not large, four consecutive years in deficit are enough to keep prices sensitive.

Tungsten remains relatively tight. Global raw tungsten supply-demand balance is forecast -4,598 tons in 2025, -2,538 in 2026, turning to a small surplus of 976 tons in 2027. Cobalt is even more constrained—DR Congo accounts for ~76% global cobalt output, and has imposed export quotas, setting the 2026–2027 annual cobalt export cap at 96,600 metal tons, about 55% lower than actual 2024 supply.

Lithium shifts from surplus to slight shortage. Guotai Haitong Securities expects global lithium supply-demand balance to move from +96,700 tons LCE in 2025, to -11,000 in 2026, -17,700 in 2027. Energy storage is the biggest change, with battery demand rising from 600 GWh in 2025 to 990 GWh in 2026, 1,238 GWh in 2027.

Not all metals enter main rising phase; nickel and ordinary steel still under pressure

Both reports indicate not all metals are bullish overall. Guotai Haitong Securities points out nickel remains the most uncomfortable in the supply-demand table. Even with tighter mine quotas, primary nickel supply-demand still shows surplus. Supply in 2025 is 3.79 million tons, total demand 3.552 million, surplus 239,000 tons; 2026 supply 3.868 million, demand 3.643 million, surplus 225,000 tons.

Steel is not a total volume story either. Apparent crude steel consumption remains under pressure, ordinary construction steel is not the main highlight—mid/high-end manufacturing steel is more noteworthy. Guotai Haitong Securities sees steel screening criteria as narrow, focusing on high-end steel, companies with strong performance/dividends/industry leadership.

This means the current focus in trading nonferrous and commodity assets is not chasing a macro narrative, but distinguishing three asset classes: first is oil, copper, and aluminum with quickly consumed inventory buffers; second is gold supported by central banks and ETFs; third is minor metals like rare earths, tin, tungsten, and cobalt with prominent supply constraints.

Market shift is more like structural revaluation, not broad price rallies

Zhongtai Securities’ “turning point” emphasizes short-term expectation gap: market prices based on ceasefire and stable supply, but inventory, spot premiums, and mining disruptions show that supply-demand tension in oil, copper, and aluminum may be surfacing.

Guotai Haitong Securities’ “main rising after adjustment” stresses medium-term screening: whichever supply is constrained by policy/resources/quotas, whichever demand is still driven by AI, power, new energy, nuclear, and storage, will more easily enter a main rising phase.

For investors, the key is not to judge if commodities as a whole will rise, but whether price increases can stay on the company profit sheet. For aluminum: look at spot premium, export demand, electrolytic aluminum profits; for copper: look at mine resources, TC changes, power grid and AI demand; for gold: look at central bank purchases, ETF inflows, US interest rate path; for minor metals: look at quotas, export restrictions, and sustained shortages.

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