"Golden March and Silver April" approaches, why are non-ferrous metals underperforming?

Since March, the overall performance of the non-ferrous metals market has been relatively weak. The Shenwan Non-Ferrous Metals Index fell 3.7% last week; secondary sub-sectors generally declined, with minor metals down 9.0% and new metal materials down 4.8%. This round of adjustment is mainly influenced by macroeconomic expectations swinging and rising risk aversion sentiment.

A report from Guosheng Securities on March 15 pointed out that geopolitical tensions have shaken bullish confidence, but they remain optimistic about opportunities in precious metals during a stagflation cycle. Currently, geopolitical risks in the Middle East continue to intensify, with the Strait of Hormuz blockade pushing international oil prices higher, raising concerns about inflation resurgence, which in turn suppresses the Fed’s rate cut expectations. The market’s expectation of two rate cuts this year, made earlier in the year, has significantly weakened. The previously anticipated loose monetary environment supporting the non-ferrous sector has contracted, with funds becoming more cautious, some profit-taking flows out of non-ferrous sectors and shifts into energy, chemicals, and US dollar assets.

From sector performance, geopolitical conflicts and rising energy prices have created structural impacts on metal prices. Regarding precious metals, despite short-term disturbances from risk asset feedback, the rising risk of stagflation supports a medium-term bullish outlook due to their safe-haven and inflation-hedging attributes.

Basic metals show divergence: Aluminum is catalyzed by Middle Eastern supply disruptions, showing short-term strength; copper, tin, and other varieties are still awaiting demand validation during the traditional peak season of “March and April,” with new energy and AI industries’ order fulfillment becoming key variables moving forward.

For investors, caution is advised regarding volatility risks caused by macro sentiment fluctuations. If energy prices continue to spiral, previously rallying commodities may face corrections. It is recommended to focus on opportunities for gold and silver at low positions, while closely monitoring developments in the Middle East and US inflation data that influence monetary policy expectations.

Precious Metals: Short-term pressure does not change medium-term bullish outlook; stagflation cycle presents opportunities

Last week, the precious metals market experienced sell-offs, with COMEX gold down 3.1% to $5,023 per ounce, COMEX silver down 4.8% to $80.71 per ounce; SHFE gold fell 0.7% to 1,133 yuan/gram, SHFE silver down 3.8% to 20,923 yuan/ton.

The immediate cause of the price correction was investor concern that high oil prices could trigger feedback effects in global risk assets, prompting some bullish funds to withdraw temporarily. However, Guosheng Securities notes that short-term disturbances do not undermine the medium-term bullish logic.

The core contradiction lies in the increasing visibility of stagflation risks. Last week, US non-farm payrolls fell significantly short of expectations, while international oil prices remained high due to the Strait of Hormuz blockade. The macro environment of “high inflation + low growth” is historically the strongest configuration for precious metals.

The escalation of Middle Eastern tensions exceeds expectations, with ongoing and intensifying geopolitical risks further reinforcing the safe-haven appeal of precious metals.

Aluminum: Middle Eastern conflict hits supply vulnerabilities, aluminum prices defy the trend and strengthen

In the context of generally weak and volatile base metals, aluminum prices have moved independently, with SHFE aluminum rising 1.0% last week to 24,960 yuan/ton.

The core driver of this aluminum price strength is supply-side geopolitical shocks. The Middle East accounts for about 9% of global electrolytic aluminum capacity. As the US-Israel-Iran conflict escalates, the Strait of Hormuz shipping is disrupted, directly affecting alumina imports and aluminum exports from the region. Some aluminum smelters in Bahrain and Qatar have begun reducing production, causing substantial disturbances to global primary aluminum supply.

Domestically, electrolytic aluminum supply has slightly increased, but downstream resumption of work has accelerated, with processing companies like aluminum sheet and strip producers increasing capacity utilization. Although high prices currently suppress some demand, social inventories continue to accumulate but at a narrowing pace. Supported by both overseas supply contraction and improving domestic macro expectations, short-term spot aluminum prices are expected to remain relatively strong and volatile.

Copper and Tin: Demand resilience remains, awaiting “March and April” season to verify strength

Last week, copper and tin prices both declined, with SHFE copper down 0.7% and SHFE tin plunging 5.0%. The report indicates that geopolitical tensions have raised concerns about demand related to AI, semiconductors, and other industries.

Copper: Global exchange inventories increased by 18,000 tons, with tariff expectations driving continued inflows into US warehouses, with LME New Orleans stocks up 9,000 tons. However, demand shows resilience; as resumption of work progresses, the spot market has shifted from backwardation to contango. Downstream processing of copper strips, foils, and pipes is expected to increase production, maintaining a healthy fundamental outlook. Short-term geopolitical disturbances do not alter the long-term positive trend.

Tin: Mine supply recovery expectations are rising. Water extraction in the Wa region has made progress, and Indonesia announced a 65,000-ton annual quota, but actual supply transmission will take time. Demand is constrained by price adjustments and high inventories, with downstream buyers reluctant to restock. Currently, tin prices lack a clear directional driver, and amid the tug-of-war between bulls and bears, prices remain volatile within a broad range.

Overall, demand structures for base metals are diverging further. Emerging industries such as new energy vehicles, wind power, photovoltaics, and energy storage are providing strong support for copper and aluminum demand, while traditional consumption sectors remain cautious. The strength of the “March and April” peak season will depend on the actual order fulfillment in high-growth sectors like power equipment and energy storage batteries.

Lithium prices continue to rebound from destocking; Cobalt market awaits demand breakthrough

Last week, battery-grade lithium carbonate prices rose modestly by 2.3% to 158,000 yuan/ton. Supply-side remains slightly expanded, with lithium carbonate output increasing 3.1% to 23,700 tons, while inventories continue to decline, decreasing by 52 tons to 101,000 tons.

On the demand side, March saw steady recovery in the power battery market, with energy storage also gaining momentum. Despite a YoY decline in EV sales in January-February, the significant increase in per-vehicle battery capacity—up 53% and 27.5% respectively in February—effectively supports high battery production. Overall, short-term lithium prices are likely to remain volatile.

The cobalt market remains weak, with domestic electrolytic cobalt prices down 0.3% to 427,000 yuan/ton. Supply is constrained by raw material costs, and companies are limited in production; demand is cautious, mainly to digest existing inventories. Short-term cobalt prices are expected to remain volatile, awaiting substantial demand growth.

Risk Warning and Disclaimer

Market risks exist; investment should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Investment based on this information is at their own risk.