Weekly Commodities Report: Copper Prices Rise, Coal Inventory Remains Low Supporting Prices

Overview

This weekly report is Jefferies' weekly data snapshot tracking the Chinese commodities market, covering six major commodity types: copper, aluminum, lithium, coal, steel, and cement. The report tracks high-frequency indicators such as prices, inventory, and supply/demand through comparison of WoW, YoY data along with policy/logistics changes, presenting the short-term market status of each product. Overall, products show divergence: copper prices rose with tight supply expectations; coal saw inventory increase but remained YoY low with improving demand; aluminum exports drove destocking strongly; lithium inventory sat at low levels facing supply uncertainty; steel consumption hit seasonal lows but export orders supported prices; cement margins compressed.

Core views

In the copper market, under the backdrop of a weaker USD and partial easing of Middle East tensions, LME spot prices rose 4.6% weekly. More importantly, the global largest copper mine Grasberg's restart time was postponed from late 2027 to early 2028, indicating complexity in recovering from supply disruptions, which will continue to support the tight supply status of the copper concentrate market. The coal market shows an inventory contradiction pattern. QHD5500 prices rose 2.5% weekly to above 830 CNY/ton. Although plant and Northern port inventories are rising (Daqin Railway maintenance completion led to increased port arrivals), total inventory remains lower than the same period last year. Crucially, demand outlook improves: China's Q1 2026 thermal power generation volume increased 3.7% YoY, compared to a -4.7% decline YoY last year, achieving a shift from negative to positive. With seasonal factors driving main plant daily coal consumption up, combined with remaining restocking demand, coal prices are supported in the short term. Aluminum exports continued strong momentum. April aluminum ingot + rod social inventory rose only 0.7% MoM, reflecting destocking after May Day holiday inventory buildup. On the export side, April exports were 59.8 ten-thousand tons, +22% MoM, +15% YoY; YTD cumulative 209.5 ten-thousand tons, +9% YoY. This trend is supported by LME premiums remaining higher than domestic spots in China, making exports economically viable. This driver is expected to continue supporting further destocking in the short term. Lithium market inventory is at near-year lows facing supply risks. Guangzhou Futures touched 20 ten-thousand CNY/ton last week, China inventory decreased 0.9% WoW, implied inventory cycle only about 4 weeks, hitting near-year low. If Zimbabwe May supply does not recover smoothly, the market may face short-term tension. Steel consumption showed seasonal weakening. April steel exports 9.5 million tons (+4% MoM, -9% YoY); YTD cumulative exports -9.7% YoY. Weekly production and apparent consumption fell 2% and 5% WoW respectively, setting seasonal lows. Interestingly, prices (and spreads) actually improved, reflecting the support effect of export orders. Cement margins squeezed by dual pressures. Unit GP compressed 4 CNY/ton WoW, affected by both cement price declines and rising coal costs. Daily production rate increased 2 percentage points WoW to 46%, still at recent seasonal low. Industry discipline is insufficient to counter weak demand, leading to profit pressure.

Analysis framework

The research report adopts a high-frequency data tracking method, focusing on weekly specific data changes such as prices, inventory, production/consumption. The core analysis logic starts from both supply and demand ends: Supply side focuses on inventory changes, capacity utilization, and capacity adjustments by major producers (e.g., Grasberg restart delay); Demand side observes export data, industrial capacity utilization, and terminal consumption indicators (e.g., thermal power generation volume); Pricing side looks at price changes, spread levels, and trade arbitrage opportunities (e.g., aluminum LME premium). Through weekly benchmarking (WoW, YoY, YTD cumulative), institutions can quickly capture trend changes and structural opportunities. This approach is particularly suitable for short-term trading and inventory management decisions for commodities.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Core drivers of the commodities market come from the supply side (inventory, capacity, mining production, trade flows) and demand side (exports, consumption, capacity utilization); imbalance at both ends determines prices and spreads

  The report judges supply/demand dynamics by tracking inventory changes, export data, and industrial capacity utilization (e.g., thermal power generation volume, steel output) week by week. For example, coal prices rose despite inventory increase because YoY inventory is low and demand improved; strong aluminum exports driving destocking reflects sustained strength in the demand side. Mastering this logic helps understand the core engine of short-term commodity price fluctuations

• Industry/Industrial Analysis FrameworkInventory cycle (Kitchin)

  Periodic fluctuation of inventory from restocking to destocking to restocking is an important force driving short-term commodity price fluctuations

  The report mentions inventory impact on prices multiple times: aluminum inventory slightly increased but still on destocking track, lithium inventory cycle only 4 weeks at low level, coal inventory increased but YoY low. These inventory states determine subsequent space for restocking or continuing destocking, thus affecting prices and market psychology

• Industry/Industrial Analysis FrameworkVolume-Price Split

  Split commodity price changes into two dimensions: trading volume (exports, production, consumption) changes and unit price (price, spread) changes

  For example, although steel April exports declined YoY, prices and spreads improved instead, indicating improvement in export order quality; Cement daily production increased but spreads compressed, reflecting costs rising faster than prices. This split helps identify structural drivers

• Industry/Industrial Analysis FrameworkSubstitution Effect Analysis

  When pricing mechanism or arbitrage space of a certain commodity changes, downstream products on related chains (like aluminum exports) will adjust flow and trading volume accordingly

  The driver of sustained strong aluminum exports is that LME premium relative to China spots remains, which is a substitute effect of international-domestic price spread arbitrage, supporting exports and driving domestic destocking

Key data

• Copper (LME Spot)Weekly rise 4.6%Rose under backdrop of weaker USD and easing Middle East tensions
• Coal (QHD5500)830 CNY/ton+, weekly rise 2.5%Inventory increased but YoY low; Q1 2026 thermal power generation volume +3.7% YoY vs last year -4.7% YoY
• Aluminum ExportsApril 59.8 ten-thousand tons (MoM+22%, YoY+15%); YTD Cumulative 209.5 ten-thousand tons (YoY+9%)LME premium relative to China spots maintained, supporting export momentum
• Aluminum InventoryMoM increase 0.7%Destocking after May Day holiday inventory increase
• Lithium (Guangzhou Futures)Touched 20 ten-thousand CNY/ton, inventory approx 4 weeksImplied inventory cycle at near-year low; inventory WoW -0.9%
• Steel ExportsApril 950 ten-thousand tons (MoM+4%, YoY-9%); YTD Cumulative YoY-9.7%Consumption set seasonal low but export orders supported price improvement
• Steel Production/ConsumptionWeekly production MoM-2%, Weekly Apparent Consumption MoM-5%Set new seasonal low
• Cement Gross ProfitUnit GP compressed 4 CNY/ton WoWDual pressure of cement price decline + coal cost rise; Daily production 46% still seasonal low

Impact & implications

This week's data reflects the commodities market entering a structural differentiation phase. Copper market has long-term support due to Grasberg restart delay, may maintain tightness in short term; Coal saw inventory increase but demand turned positive, YoY low inventory implies restocking space, prices defended; Aluminum exports continued strong momentum to drive destocking, international price spread arbitrage becomes important support; Lithium market inventory cycle brief, sensitive to supply changes; Steel and Cement face demand pressure, profit space compressed. These changes directly affect inventory management, procurement rhythm, and cost control of related industry chains. Meanwhile, delays on supply side, changes in trade flows etc. also warrant follow-up attention.

Risks

• Middle East tensions may flare up again, impacting copper price trends
• Grasberg restart schedule carries risk of further delay
• Zimbabwe lithium supply recovery falling short of expectations may intensify short-term market tension
• Global economic growth slowdown may suppress demand for commodities
• USD exchange rate fluctuations impact prices of USD-denominated commodities

What to watch

• Grasberg production progress and restart time trends
• Seasonal trends of China electricity demand and thermal power generation volume improvement continues
• Trends of aluminum LME premium vs China spots spread, and continuous support strength for exports
• Whether Zimbabwe lithium supply recovers smoothly in May
• Signs of recovery in steel/cement terminal demand, and whether cost pressures can ease