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

Ask AI · How does stagflation risk enhance the value of precious metals?

Since March, the non-ferrous metals market has generally performed weakly, with the Shenwan Nonferrous Metal Index falling 3.7% last week; secondary sub-sectors mostly declined, with small metals down 9.0% and new metal materials down 4.8%. This round of adjustment is mainly influenced by macroeconomic expectations swings and rising risk aversion sentiment.

Guosheng Securities’ report on March 15 pointed out that geopolitical disturbances shake bullish confidence, but they remain optimistic about opportunities in precious metals during stagflation. Currently, Middle East geopolitical risks continue to intensify, the Strait of Hormuz blockade pushes 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, projected earlier, has significantly weakened. The previously loose monetary environment supporting the non-ferrous sector has contracted, funds have become more cautious, some profit-taking from non-ferrous sectors has flowed out, shifting towards energy, chemicals, and USD assets.

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

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

For investors, caution is advised regarding volatility risks caused by macro sentiment fluctuations. If energy prices continue to spiral, previously surged commodities may face corrections. It is recommended to focus on opportunities for low-position layout in precious metals, while closely monitoring developments in the Middle East and U.S. inflation data’s influence on monetary policy expectations.

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

Last week, the precious metals market experienced sell-offs, with COMEX gold down 3.1% to $5,023/oz, COMEX silver down 4.8% to $80.71/oz; SHFE gold down 0.7% to 1133 yuan/gram, SHFE silver down 3.8% to 20,923 yuan/kilogram.

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

The core contradiction is that stagflation risk is becoming explicit. Last week, U.S. 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 precisely the strongest configuration historically for precious metals.

The escalation of Middle East tensions beyond expectations, with ongoing and intensifying geopolitical risks, further reinforces the safe-haven appeal of precious metals.

Aluminum: Middle East conflict hits supply vulnerabilities, aluminum prices defy trends 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 stems from supply-side geopolitical shocks. The Middle East accounts for about 9% of global electrolytic aluminum capacity. As conflicts between the U.S., Israel, and Iran escalate, 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 disruptions to global primary aluminum supply.

Domestically, supply of electrolytic aluminum has slightly increased, but downstream resumption of work has accelerated, with processing companies like aluminum sheet and strip producers increasing capacity utilization. Although current high prices suppress some demand, social inventories continue to accumulate but at a narrowing rate. 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-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 week-on-week, with tariff expectations driving inventory inflows into the U.S., as the LME New Orleans warehouse added 9,000 tons. However, demand shows resilience; as production resumes, the spot market has shifted from a discount to a premium. Downstream processing such as copper strip, foil, and pipe production is expected to increase, maintaining healthy fundamentals. Short-term geopolitical disturbances do not alter the long-term positive outlook.

Tin: Supply-side recovery expectations are rising. Water extraction in the Wa region has made progress, and Indonesia announced a 65,000-ton annual quota, though actual supply transmission will take time. Demand is constrained by price adjustments and high inventories, with downstream buyers reluctant to stockpile. Currently, tin prices lack a clear directional trend, remaining in wide oscillation amid the tug-of-war between bulls and bears.

Overall, demand structures for base metals are diverging. Emerging industries like new energy vehicles, wind power, photovoltaics, and energy storage strongly support copper and aluminum demand, while traditional consumption sectors remain cautious. The strength of the “March-April” peak season will depend on the actual orders 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% week-on-week 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—53% and 27.5% growth respectively in February compared to the same period last year—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 slightly by 0.3% to 427,000 yuan/ton. Supply is constrained by raw material costs, and enterprises are limited in production; demand is cautious, mainly to digest existing inventories. Short-term cobalt prices are expected to fluctuate, awaiting substantial demand growth.