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Informist, Tuesday, Sept. 23, 2025

MUMBAI – Weakening demand is likely to meet with high but stagnating supply, capping further price gains in most base metals in the coming months, Commerzbank said in a report. The German bank thinks the potential for a further upside in prices of all base metals has been "more or less exhausted" as the economic consequences of the tariffs imposed by the US, even if not as severe as initially assumed, will leave their mark on the real economy, particularly on the US and China.

The London Metal Exchange's base metals index reached its highest level this year at the beginning of last week and is currently up around 10% since the start of the year, Commerzbank said in the report. However, a look at individual metal prices revealed that increases in the prices of copper and aluminium are primarily responsible for the rise of the index.

Continuing concerns of a supply shortage, primarily of copper ore, is likely to have been one of the main reasons for the sharp rise in copper prices this year, which are up 14% since Jan. 1. A sharp decline in LME copper inventories boosted prices of the red metal. The drop in copper stocks on the LME was mostly because buyers rushed to import copper before US tariffs on the metal took effect. Now that the tariffs are in place, and they have turned out to be less harsh than feared, LME inventories have started recovering, the bank noted. With China continuing to produce copper at a strong pace, it is likely this trend will keep going, so Commerzbank expects the price of copper to fall back below the $10,000 per tonne mark in the coming months.

Aluminium production in China, which accounts for about 60% of the world's primary aluminium, has been running at a high level, providing ample supply, especially outside the US, Commerzbank said. "However, we assume that production has now reached a plateau," the bank said in its report. "The government in Beijing has set an upper limit for annual aluminium production, which would be reached if the current level (on a monthly basis) is maintained. Thus, going forward, it is likely to stagnate or even decline slightly."

Aluminium inventories at the LME declined significantly until June but have been rising since. This is probably related to the US tariffs, which are dampening demand for the metal in the world's biggest economy. The aluminium market was hit hardest by US tariffs. A 50% tariff is now levied not only on imports of the metal but also on products made from aluminium.

Zinc production is likely to benefit from improved availability of raw materials, easing previous concerns about shortages, Commerzbank said. Additionally, the International Lead and Zinc Study Group expects zinc production to grow almost 2% this year, following a decline of around 4% in 2024.

Strong supply is also weighing on the price of nickel. LME inventories of the metal have risen significantly since their low in 2023, reflecting strong expansion of production in Asia, especially Indonesia. "However, the nickel boom in Indonesia is taking its toll, not only through a sharp drop in prices, but also through a decline in production," the bank said. The supply of nickel is expected to not grow as strongly in the future as it has recently because Indonesia's government has started enforcing stricter regulations, including shutting down mines for breaches of permit terms and issuing production quotas for only one year instead of three as before, Commerzbank said.  End

US$1 = INR 88.75

Reported by Reshma Ravi

Edited by Rajeev Pai

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