Base metals have seen a strong start to the new year, though they have not reached the record highs set by precious metals. 

Copper and aluminum continue their rallies from last year, while the price of nickel has seen a particularly sharp jump since the end of last year. A common thread driving all three metals is the primary concern over supply.

Copper, now trading nearly $2,000 higher than its May 2024 peak, is being buoyed by fears of new US tariffs alongside persistent raw material shortages. 

This has been evident in the rising inventories on the COMEX. Tariffs initially applied only to semi-finished copper products. 

“However, there are now apparent fears that the tariffs will be extended to refined copper after all, which is why US companies seem to be rebuilding or further expanding their copper stocks,” Thu Lan Nguyen, head of FX and commodity research at Commerzbank AG said in a report.

Near-term copper setback possible

Despite the recent surge, the near-term outlook for copper is mixed. Nguyen points out that since there is “no indication as yet as to whether and when such a step will actually be taken, it seems questionable whether this stockpiling will continue.” 

Furthermore, copper production in China, the world’s most important metal producer, is likely to remain high in the short term. 

Accordingly, Commerzbank Research even sees “some potential for a setback in the copper price in the coming weeks.” 

“Only later in the year, when it becomes apparent that Chinese copper production is reaching a plateau, not least due to government intervention, do we expect sustained gains,” Nguyen added.

We see the price stabilizing at around USD 14,000 per ton.

Aluminum production peaked in China

The forecast for the aluminum price follows a similar pattern. 

Production in China, the most important manufacturing country, clearly peaked last year, with monthly output recently stagnating at a high level. 

Falling London Metal Exchange inventories since early November also indicate a supply shortage. 

While Commerzbank considers the price increase to be sustainable, it sees only limited further upside potential, projecting a price of $3,300 per ton by the end of this year.

Higher prices may cap rally

A crucial factor limiting more aggressive forecasts is the expected supply response to the elevated price levels. 

Nguyen said: 

An important reason why we are only raising our forecasts moderately and not continuing the recent price trend is that production outside China is likely to be stimulated by the higher price level. 

The copper price is near its record high, and aluminum is at a level last seen in 2022. 

Lower energy costs—especially European gas—and cheaper raw materials like bauxite and alumina are improving profitability for aluminum producers outside China. 

“In the medium to long term, therefore, a revival in aluminum production is to be expected,” Nguyen said. 

This should cap the price in a “natural way.” However, given the price dynamics of recent months, further significant upward swings cannot be ruled out, especially in the short term.

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