China Basic Materials Weekly: Gold Strengthens, Copper Retreats, and Steel Mill Profits Fall Further into Losses

Overview

The report tracks prices, inventories, production, demand, and margins across China's basic materials subsectors through August 19-21, 2026. Its main conclusion is that sector performance diverged significantly: gold and certain minor metals rose, while copper prices retreated amid inventory accumulation and insufficient demand; steel prices rebounded somewhat, but higher coking coal costs widened steel mill losses; demand and profitability in cement, glass, and paper remained weak.

Core views

Copper prices retreated to US$13,856.5/t after the settlement squeeze subsided early in the week, then returned above US$14,000/t with support from a weaker US dollar, but the report believes this rebound lacked strong fundamental support. Improved LME deliverable supply mainly came from the restoration of registered warrants, while domestic spot supply also increased after contract settlement. Downstream procurement remained price-sensitive, and the demand recovery following price cuts failed to persist. As of August 21, LME copper fell 3.2% for the week to US$14,113/t, while Yangtze copper fell 0.2% to RMB107,930/t, equivalent to US$14,212/t excluding tax. SHFE, LME, and COMEX copper inventories grew by 28.4%, 17.1%, and 0.9%, respectively, reaching 90kt, 240kt, and 742kt. Shanghai bonded and social inventories rose 15.6% and 4.2%, respectively, while Guangdong bonded inventory fell 2.4% and social inventory rose 0.9%. Meanwhile, monthly domestic copper concentrate treatment charges deteriorated further to negative US$181.35/t, reflecting continued pressure on the smelting segment. Aluminum prices and margins weakened in tandem. LME aluminum fell 1.8% for the week to US$3,192/t, while Yangtze aluminum fell 0.7% to RMB23,680/t, equivalent to US$3,118/t excluding tax. Based on a 60% captive-power ratio, the national average aluminum profit declined by RMB160/t to RMB7,780/t. China's aluminum ingot inventory fell 3.1% to 803kt, while domestic alumina prices remained at RMB2,682/t. The inventory decline has not prevented aluminum prices and industry margins from retreating. Gold significantly outperformed industrial metals, with COMEX spot gold rising 4.3% for the week to US$4,565/oz. The fund flow and reserve data presented in the report also strengthened: global gold ETFs recorded net inflows of 23t in July 2026, compared with net outflows of 74t in June, while China's gold reserves increased month over month to 76.08mn oz in July. Other resource commodities diverged, with U₃O₈ rising 1.1% to US$87.55/lb, praseodymium-neodymium oxide rising 0.5% to RMB725,400/t, and 65% WO₃ wolframite concentrate rising 1.2% to RMB418,000/t. In battery materials, domestic 99.5% battery-grade lithium carbonate prices rose 0.5% for the week to RMB152,250/t, and total inventory declined 8.0% to 86.4kt. However, higher spodumene prices compressed smelting economics, with unit refining profit for spodumene-based lithium carbonate falling to a loss of RMB3,548/t. Shanghai cobalt prices plunged 6.7% to RMB306,000/t, indicating similarly pronounced divergence within battery materials. The steel sector presented a combination of rising steel prices and deteriorating profits. As of August 21, rebar and hot-rolled coil prices in major cities rose 0.9% and 1.0% to RMB3,224/t and RMB3,340/t, respectively, while 62% imported iron ore prices rose 0.3% to US$95.65/t. However, coking coal prices surged during the week, becoming the primary reason for the further decline in steel mill profits. Spot cash profits for rebar and hot-rolled coil decreased by RMB194 and RMB152, respectively, falling to losses of RMB666/t and RMB611/t. On a large-steel-mill basis, the two products also recorded losses of RMB496/t and RMB441/t, respectively. The modest recovery in steel prices was insufficient to offset raw material cost pressure. Steel supply and demand data also showed no strong improvement. Output of the five finished steel product categories fell 1.2% to 8.02mnt, with rebar and hot-rolled coil output declining 1.2% and 1.6% to 1.80mnt and 2.92mnt, respectively. Apparent consumption fell 1.8% to 8.21mnt. Finished steel inventory declined 1.2% to 16.10mnt, while iron ore inventory at 45 ports fell 0.4% to 165mnt. Nationwide blast furnace capacity utilization declined 0.2 percentage points to 89.3%, the operating rate of 247 sampled steel mills rose 0.2 percentage points to 82.8%, and the operating rate of electric arc furnace mills fell 1.0 percentage point to 53.8%. Slight supply contraction and inventory declines have not yet translated into profit recovery. The average price of 5,500-kcal thermal coal at Qinhuangdao Port fell 0.2% to RMB862/t, but this did not alter the pressure from higher coking coal prices on steelmaking costs. Cement demand recovered somewhat after adverse weather effects eased, but prices remained affected by the partial reversal of previous price increases. The national average cement price fell 0.2% to RMB307/t, with prices in Hubei, Sichuan, and Gansu declining by RMB10-20/t and Chongqing rising by RMB30/t. East China prices were unchanged at RMB299/t, while Central and Southern China prices fell 0.5% to RMB317/t. The nationwide shipment rate increased 4.9 percentage points to 40.5%, reflecting improved downstream activity after rainfall and high temperatures eased in mid-August, but the inventory ratio still rose 0.2 percentage points to 71.0%. The report notes that cost pressure gave producers a strong incentive to restore prices, although the actual national average price still edged lower. Float glass, paper, and solar glass remained weak. The nationwide average tax-inclusive float glass price fell 1.0% to RMB1,081/t, with orders remaining insufficient and the market primarily purchasing on demand. Soda ash prices also fell 1.0% to RMB1,148/t, while direct-supply pipeline natural gas prices remained at RMB2.30/m³. The report estimates that Xinyi float glass's gross margin narrowed by 0.9 percentage points to 10.1%. Glass inventory in monitored regions stood at 69.19mn weight cases, equivalent to 38.01 days. Of the 247 effective float glass production lines nationwide, 194 were operating, with effective capacity rising to 141,545t/day, indicating the coexistence of weak demand and increasing capacity. In paper, as of August 19, the national average containerboard price fell 0.02% to RMB3,861/t, corrugated medium prices fell 0.2% to RMB3,223/t, and mixed paper prices declined 0.1% to RMB3,720/t. As supply-demand conditions deteriorated, the domestic average price of old corrugated containers rose 1.4% to RMB2,005/t, creating a margin squeeze from declining product prices and rising costs. Nine Dragons' profit tracking indicator showed net profit of RMB65/t for the week. Midpoint prices for 3.2mm and 2.0mm coated solar glass products remained at RMB16.75/m² and RMB9.50/m², respectively. Flat Glass's gross margin for 2.0mm products was unchanged week over week, while Xinyi Solar's gross margin fell 1.2%. Average daily capacity remained at 75,800t, while inventory days increased 0.9% to 45.56 days, indicating that stable prices were not accompanied by inventory improvement.

Analysis framework

The report uses a weekly industry-tracking approach, first comparing week-over-week price changes across commodities and materials, then assessing supply and demand strength using exchange or social inventories, production, operating rates, apparent consumption, and shipment rates, and finally linking product prices with raw material costs to estimate unit profits or gross margins for smelting, steel, glass, paper, and solar glass. Its reasoning does not focus solely on price direction, but instead tests whether price changes are jointly supported by demand, inventory, and profitability data.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Joint tracking of prices, inventories, production, and demand

  The report cross-validates price changes against exchange inventories, social inventories, production, apparent consumption, shipment rates, and inventory days to assess supply-demand conditions in copper, steel, cement, glass, and paper. For example, the copper price rebound is considered to lack fundamental support because inventories increased broadly and the demand recovery failed to persist.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Weekly decomposition of volume, price, and profit changes

  The report separately examines prices, production or sales indicators, and margins to distinguish nominal price increases from actual profitability improvement. Rising steel prices alongside falling consumption and climbing coking coal costs, ultimately driving steel mill cash profits further into negative territory, is a typical application of this method.

• (Out-of-Vocabulary Method)

  Tracking spot cash profit, unit refining profit, and gross margin

  The report combines spot product prices with major raw material and energy costs to estimate steel mill spot cash profits, lithium carbonate refining profits, aluminum industry profits, and the gross margins or per-tonne net profits of glass and paper companies, thereby identifying the actual impact of price changes on producer profitability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Copper

  Prices retreated for the week, and the brief rebound was not supported by inventory and demand data.

  Strengths

  A weaker US dollar supported a price rebound later in the week.

  Weaknesses

  Inventories increased across all three major exchanges, domestic spot supply recovered, downstream procurement remained price-sensitive, and the demand recovery failed to persist.

  Comparison

  LME copper fell 3.2% for the week, a larger decline than Yangtze copper's 0.2%.

  Risks

  Continued inventory accumulation and industry-chain pressure reflected by copper concentrate treatment charges falling into negative territory.

• Gold

  Spot prices rose significantly, accompanied by global gold ETFs shifting to net inflows and an increase in China's gold reserves.

  Strengths

  COMEX spot gold rose 4.3% for the week, and global gold ETFs recorded net inflows of 23t in July.

  Comparison

  Weekly performance was significantly stronger than that of copper, aluminum, and cobalt.

• China Steel Industry

  Steel prices edged higher, but rising coking coal costs further deteriorated spot cash profits.

  Strengths

  Finished steel inventories fell 1.2%, while both rebar and hot-rolled coil prices rose.

  Weaknesses

  Apparent consumption fell 1.8%, and spot cash profits for both rebar and hot-rolled coil were negative.

  Comparison

  Losses on a large-steel-mill basis were smaller than on a spot basis, but rebar and hot-rolled coil still lost RMB496/t and RMB441/t, respectively.

  Risks

  Further increases in coking coal prices may continue to squeeze steel mill profits.

• Xinyi float glass

  As the report's float glass profit-tracking subject, its gross margin narrowed as product prices declined.

  Strengths

  The gross margin remained at 10.1%.

  Weaknesses

  The gross margin fell 0.9 percentage points for the week amid insufficient market orders and weak demand.

  Risks

  On-demand procurement, elevated inventories, and increasing effective capacity may continue to constrain profitability.

• Flat Glass and Xinyi Solar

  As tracked subjects for 2.0mm solar glass gross margins, their performance diverged while prices remained unchanged.

  Strengths

  Flat Glass's gross margin was unchanged week over week.

  Weaknesses

  Xinyi Solar's gross margin fell 1.2% for the week, while industry inventory days rose to 45.56 days.

  Comparison

  Flat Glass's gross margin was unchanged, while Xinyi Solar's declined 1.2%.

  Risks

  Solar glass inventory days increased, while neither prices nor average daily capacity declined.

• Nine Dragons

  The report tracks containerboard industry-chain profitability using a net-profit-per-tonne indicator.

  Strengths

  The net profit tracking value was RMB65/t this week.

  Weaknesses

  Paper prices edged lower while old corrugated container costs increased.

  Risks

  Deteriorating supply-demand conditions and rising OCC costs jointly compress profit margins.

Key data

• LME Copper PriceUS$14,113/tDown 3.2% for the week as of August 21, after falling as low as US$13,856.5/t during the week
• Yangtze Copper PriceRMB107,930/tDown 0.2% for the week, equivalent to US$14,212/t excluding tax
• Monthly Copper Concentrate Treatment Charge-US$181.35/tDeteriorated further as of August 21
• SHFE/LME/COMEX Copper Inventories90kt/240kt/742ktUp 28.4%/17.1%/0.9% for the week, respectively
• LME Aluminum PriceUS$3,192/tDown 1.8% for the week
• National Average Aluminum ProfitRMB7,780/tBased on a 60% captive-power ratio, down RMB160/t for the week
• COMEX Spot GoldUS$4,565/ozUp 4.3% for the week
• Monthly Global Gold ETF Flows23t net inflow in July 202674t net outflow in June 2026
• China's Gold Reserves76.08mn ozIncreased month over month in July 2026
• Battery-Grade Lithium Carbonate PriceRMB152,250/tUp 0.5% for the week
• Total Lithium Carbonate Inventory86.4ktDown 8.0% for the week as of August 20
• Lithium Carbonate Refining Profit-RMB3,548/tEstimated on a spodumene basis and squeezed by rising spodumene prices
• Shanghai Cobalt PriceRMB306,000/tDown 6.7% for the week
• Rebar/Hot-Rolled Coil PricesRMB3,224/t / RMB3,340/tUp 0.9% and 1.0% for the week, respectively
• Rebar/Hot-Rolled Coil Spot Cash Profits-RMB666/t / -RMB611/tDown RMB194/t and RMB152/t for the week, respectively
• Apparent Steel Consumption8.21mntDown 1.8% for the week
• Finished Steel Inventory16.10mntDown 1.2% for the week
• National Average Cement PriceRMB307/tDown 0.2% for the week
• National Cement Shipment Rate/Inventory Ratio40.5% / 71.0%Up 4.9 percentage points and 0.2 percentage points for the week, respectively
• National Float Glass PriceRMB1,081/tDown 1.0% for the week as of August 20
• Xinyi Float Glass Gross Margin10.1%Down 0.9 percentage points for the week
• National Average Containerboard PriceRMB3,861/tDown 0.02% for the week as of August 19
• Nine Dragons Net Profit per Tonne Tracking ValueRMB65/tEstimated value for this week
• Solar Glass Capacity/Inventory Days75,800t/day / 45.56 daysCapacity was unchanged week over week, while inventory days rose 0.9% for the week

Impact & implications

The report indicates that price performance in China's basic materials sector cannot be directly equated with improved profitability. Gold is jointly supported by prices, ETF flows, and increasing reserves, while copper faces inventory accumulation, an unsustained demand recovery, and deteriorating treatment charges. Even where steel, cement, glass, and paper show localized price stabilization or activity recovery, they remain constrained by raw material costs, inventories, or weak end demand, and producer profit recovery is not yet firmly established.

Risks

• The copper price rebound lacks strong fundamental support, with exchange and domestic inventories increasing and the demand recovery failing to persist.
• A sharp rise in coking coal prices may continue to squeeze the profits of already loss-making steel mills.
• Float glass orders remain insufficient, demand is weak, and effective capacity is increasing.
• Paper industry supply-demand conditions are deteriorating while OCC costs are rising, creating dual pressure on margins.

What to watch

• Monitor whether copper exchange and domestic social inventories stop accumulating and whether downstream procurement following price cuts can persist.
• Monitor subsequent changes in coking coal costs, apparent steel consumption, and steel mill cash profits.
• Monitor whether improving cement shipment rates translate into inventory declines and price recovery.
• Monitor inventory days, capacity, and corporate gross margins for float glass and solar glass.
• Monitor whether declining lithium carbonate inventories can offset the squeeze on refining profits from rising spodumene prices.