China Basic Materials Weekly: Copper and lithium weaken, aluminium prices rebound, construction materials demand under pressure
In the week to 23 October, copper, gold and lithium carbonate prices fell, while aluminium prices and margins recovered; steel demand weakened, and cement price increases coincided with lower shipment rates.
Original source：BofA Global ResearchFirst published on Unhidea：Original source date：
Key takeaway
Basic materials prices tracked by Bank of America diverged: aluminium prices and margins recovered, copper and lithium fell, and weakening seasonal demand continued to weigh on steel and some construction materials.
Why did copper prices retreat, and how did aluminium perform?
Bank of America said renewed US-Iran tensions and stalled peace talks raised concerns about higher energy costs and persistent inflation, weighing on copper market sentiment. In the week to 23 October, LME copper fell 2.1% to 14,199 dollars per tonne, while Changjiang copper fell 1.6% to 108,790 yuan per tonne.
The domestic monthly copper concentrate treatment charge fell further to negative 241.17 dollars per tonne. Inventory changes varied by region: Shanghai bonded and social inventories rose 37.6% and 28.3% respectively week on week, while the two inventory measures in Guangdong fell 3.2% and 30.5% respectively.
Aluminium prices were relatively firm: both LME and Changjiang aluminium rose 0.9% week on week, to 3,032 dollars per tonne and 23,680 yuan per tonne respectively. Average aluminium profit nationwide increased by 220 yuan week on week to 7,346 yuan per tonne; as of 22 October, China's aluminium ingot inventories had fallen 10% week on week to 493 thousand tonnes.
How much did gold and battery materials fall?
As of 23 October, COMEX spot gold had fallen 3.5% over the week to 4,022 dollars per ounce. Earlier, global gold ETFs recorded net inflows of 67 tonnes in September, below the 121 tonnes recorded in August.
Domestic battery-grade lithium carbonate fell 5.0% over the week to 97,000 yuan per tonne, while Shanghai cobalt fell 6.4% to 235,000 yuan per tonne. The unit refining profit for lithium carbonate produced via the spodumene route tracked by Bank of America remained negative at 13,411 yuan per tonne; as of 22 October, total domestic lithium carbonate inventories had fallen 3.0% week on week to 130.3 thousand tonnes.
Why did steel inventory declines fail to support prices?
Seasonal end-user demand weakened and downstream buyers purchased only as needed, while rebar and hot-rolled coil output increased slightly, slowing the pace of inventory declines. As of 23 October, inventories of the five major steel products had fallen 2.2% week on week, while apparent consumption fell 4.5% to 8.24 million tonnes over the same period.
Rebar and hot-rolled coil prices fell 1.6% and 1.9% week on week to 3,240 yuan per tonne and 3,242 yuan per tonne respectively; over the same period, iron ore edged up 0.2% to 89.9 dollars per tonne.
Steel mills' spot cash margins remained negative: losses were 472 yuan per tonne for rebar and 559 yuan per tonne for hot-rolled coil, but narrowed by 25 yuan and 12 yuan respectively from the previous week.
Were cement price increases accompanied by an improvement in demand?
As of 23 October, the average cement price nationwide had risen 2.8% week on week to 338 yuan per tonne. Bank of America said that despite a seasonal slowdown in demand, producers were pushing through price increases during the remaining demand window to narrow losses.
Demand indicators weakened over the same period: rain in eastern China and cooler weather in the north affected demand, and the national cement shipment rate fell 0.5 percentage points week on week to 45.4%, while the inventory rate remained at 67.2%.
What pressures were glass and paper prices facing?
As of 22 October, the national average float glass price, including tax, had fallen 0.5% week on week to 1,075 yuan per tonne. Downstream demand was weak, and cooler weather in the north sent more supply south, increasing local supply pressure; Bank of America estimated that Xinyi's float glass gross margin fell 1 percentage points week on week to 6.1%.
As of 21 October, the national average containerboard price had fallen 0.4% week on week to 3,727 yuan per tonne. A widening supply-demand gap and lower recovered corrugated paper prices weakened support for paper prices, but lower raw material costs also provided some relief to margins; Bank of America's Nine Dragons Paper profit tracker showed net profit of 61 yuan per tonne for the week.
