UBS Expert Calls: Lithium, Aluminum, Copper, and Tungsten Fundamentals Retain Support; Medium-Term Aluminum Supply Expansion Puts Pressure on Prices
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UBS Expert Calls: Lithium, Aluminum, Copper, and Tungsten Fundamentals Retain Support; Medium-Term Aluminum Supply Expansion Puts Pressure on Prices
The report consolidates expert views on nickel, lithium, aluminum, copper, and tungsten, with the core conclusion that in 2026 many non-ferrous metals remain in a tight or near-balance supply-demand state, while price persistence depends on policy implementation, downstream demand, inventories, and the pace of new supply coming online.
- On nickel, experts believe prices could stay above US$21,000/ton if limonite ore trading prices strictly track the new HPM benchmark and when royalty fees, freight, and sulfur prices rise, though current actual trading price moves remain limited.
- On lithium, experts expect average 2026 prices around RMB170k/ton LCE, with a temporary peak possibly reaching RMB250k/ton LCE, but they consider such highs unsustainable, as global supply-demand is expected to remain in near balance.
- On aluminum, a 1.9 million ton global supply gap in 2026 supports prices, but from 2027, new capacity coming online in Indonesia, Vietnam, India and others may bring clearer downside risk.
- On copper, fundamentals still provide support; if additional supply disruptions materialize and geopolitical tensions ease, prices may move toward US$14,000/ton, while grid, power generation, and photovoltaic demand are the main uncertainties.
- On tungsten, 2026 demand is expected to grow about 9% year-on-year and the market has a roughly 3,000-ton gap, with prices still correcting in the short term; however, replenishment cycles in July–August may provide renewed support.
Report interpretation
Overview
This UBS China basic materials report compiles key points from LME Week expert calls covering nickel, lithium, aluminum, copper, and tungsten. The focus is not on single-stock valuation, but on commodity supply-demand structure, price drivers, policy variables, inventory cycles, and downstream demand shifts. Overall, in 2026, many commodities show relative tightness or tight balance, giving price support; however, medium-term risks differ by commodity, especially as aluminum faces potential mid-term supply expansion from overseas between 2027 and 2028, copper faces weakening demand in parts of end-use, and nickel and lithium are affected by policy, mine-side supply, and battery demand changes.
Core views
For nickel, key variables are Indonesia HPM policy, limonite trading prices, and RKAB ore quotas; for lithium, the main theme is the tight balance between high growth in battery demand and potentially optimistic supply forecasts. Aluminum prices in the short term are supported by a 2026 global supply gap, but from 2027 onward overseas new supply may weigh on prices. Copper fundamentals remain supportive and there is upside under scenarios of supply disruption, but weaker demand from grid, power generation, and photovoltaics is the main pressure. Tungsten is in a short-term price correction phase, but demand structure upgrades, supply constraints, and possible Q3 replenishment may provide temporary support.
Analysis framework
The report mainly uses expert interviews and a value-chain supply-demand analysis framework, combining mine-side policy, smelting costs, end demand, inventory cycles, regional supply changes, and price-band judgment to make scenario-based assessments for key metals. The evidence is primarily from expert opinions, channel research, and supply-demand figures, rather than company financial models or stock valuation models.
Methodology notes
Forming metal price views through industry experts’ assessments of supply-demand, policy, costs, and inventories.
The report cites expert judgments separately for nickel, lithium, aluminum, copper, and tungsten, which is useful for identifying short- to medium-term industry variables, but conclusions are dependent on expert assumptions and channel information.
Using demand growth, supply increment, inventories, and gaps to infer price support or downside pressure.
Lithium, aluminum, and tungsten sections explicitly discuss 2026 demand growth, supply growth, or supply gaps; aluminum further discusses the effect of increased supply in 2027-2028 on prices.
Treating policy execution, supply disruptions, demand changes, and replenishment cycles as triggers for upside or downside moves in prices.
Nickel is influenced by Indonesia policy and ore quotas, copper by both supply disruptions and weakening demand, tungsten by replenishment and inventory digestion, and aluminum by new overseas capacity coming online.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- NickelCore discussed metal
- Strengths
- If Indonesia's HPM policy is strictly implemented, HPAL feedstock costs rise and support nickel prices; RKAB quota adjustments could make supply patterns clearer.
- Weaknesses
- Current actual limonite trading price changes are limited, indicating delay in policy transmission or negotiation uncertainty.
- Comparison
- Compared with lithium and copper, nickel is more influenced by Indonesia policy and ore quotas than by pure end-demand growth.
- Risks
- Excessively rapid capacity expansion, sustained surplus from technological upgrades, weak stainless steel and battery demand, and EV supply-chain disruptions.
- LithiumCore discussed metal
- Strengths
- Global lithium-ion battery demand is expected to grow 33% in 2026 and ESS battery output is expected to rise 70%, with supply-demand potentially in tight balance.
- Weaknesses
- Temporary high prices are unlikely to be sustainable; EV sales growth is relatively weaker, and prices are sensitive to supply forecasts and demand realization.
- Comparison
- Compared with nickel, lithium’s key support comes from battery demand and the risk that optimistic supply forecasts may be revised.
- Risks
- Commodity price volatility, regulatory changes, and portable electronics, EV battery, and BESS demand below expectations.
- AluminumCore discussed metal
- Strengths
- A roughly 1.9 million ton global supply gap in 2026 supports prices; overseas cutbacks and Middle East tightness provide near-term support.
- Weaknesses
- Downstream demand in China is weak and inventories remain high, while overseas new supply in 2027-2028 may rise materially.
- Comparison
- Aluminum has the clearest time-division divergence among commodities in the report: stronger short-term than medium-term supply-demand outlook.
- Risks
- Weak property and infrastructure demand, softer export orders, lower-than-expected renewable energy installations, and recovery in overseas supply.
- CopperCore discussed metal
- Strengths
- Fundamentals still have support, and under supply-disruption scenarios prices may move toward US$14,000/ton; tighter spot premia may also get supported by tighter liquidity in the short term.
- Weaknesses
- Grid investment, power generation, and photovoltaic demand may weigh on consumption; latent inventory release could weaken the buffering effect of trader inventories.
- Comparison
- Compared with aluminum and tungsten, copper's upside relies more on supply disruptions and macro relief, while demand-side uncertainty is more pronounced.
- Risks
- Commodity price volatility, regulatory changes, production disruptions, weaker property construction, grid equipment, appliance, machinery, and transport demand.
- TungstenCore discussed metal
- Strengths
- 2026 demand is expected to grow around 9%, primary supply is flat and enforcement is stricter, and the market has about a 3,000-ton gap; high-end hard alloys, aerospace, fusion coatings, and high-temperature alloys provide long-term incremental demand.
- Weaknesses
- Iron-tungsten demand has declined due to molybdenum-iron substitution, and prior excessive hoarding means prices are still correcting.
- Comparison
- Tungsten depends more on inventory digestion and replenishment cycles, with larger short-term price swings than longer-term fundamental improvement.
- Risks
- Commodity price volatility, regulatory changes, production disruptions, photovoltaic, steel alloy, and defense demand below expectations.
Key data
- Potential nickel price support levelAbove US$21,000/tonThis is conditional on limonite ore trading prices strictly tracking the new HPM benchmark and considering rising royalties, freight, and sulfur prices.
- Potential increase in Indonesian nickel ore supplyAdditional 52 million wet tons in July, total supply 331 million wet tonsExperts estimate total nickel ore supply including imports from the Philippines, versus demand of 325 million wet tons.
- 2026 lithium price average forecastRMB170k/ton LCEVAT included; experts think a temporary peak could reach RMB250k/ton LCE but would not be sustainable.
- 2026 global lithium-ion battery demand growth33% year-on-yearGlobal EV battery output is expected to grow 25%, while ESS battery output is expected to grow 70%.
- 2026 global lithium supply growth27% year-on-yearExperts think current supply forecasts may be overly optimistic, so supply-demand may remain in tight balance.
- 2026 global aluminum supply gapAbout 1.9 million tonsOverseas shortage exceeds 3 million tons, affected by Mozal curtailment and Middle East reductions.
- China aluminum annual outputClose to 46 million tonsHigh profitability keeps output near capacity limits, but downstream demand is weak and inventories are elevated.
- Indonesia aluminum output outlookAbout 1.7 million tons in 2026, about 2.7 million tons in 2027, possibly 6 to 7 million tons by 2030Indonesia is seen as a key swing factor for medium-term overseas aluminum supply.
- Copper rally scenarioCould approach US$14,000/tonThis is on the premise of further supply disruptions combined with eased geopolitical tensions.
- Domestic sulfuric acid priceRMB1,700 to RMB1,800/tonExperts expect it to fall back to a support band of RMB1,200 to RMB1,300/ton if Middle East tensions ease.
- Scrap copper rod operating rate13% to 15% in Q1 2026Reverse VAT invoicing and fair competition regulation are pressuring scrap-copper-rod producers, with output down 280,000 tons year-on-year.
- 2026 tungsten demand growthAbout 9% year-on-yearDemand mix is changing; APT is supported by exposure to high-end hard alloys and aerospace.
- Tungsten market gapAbout 3,000 tonsPrimary supply is expected to be flat year-on-year, with most new demand met by increased scrap supply.
- Tungsten concentrate price correction35% down to RMB680k/ton from mid-March peakFor 65% black tungsten concentrate, this is mainly due to excessive prior inventory build-up.
Impact & implications
The core investment takeaway is that in 2026 price support in basic materials and non-ferrous metals comes more from supply-demand tightness, policy execution, and replenishment cycles than from broad expansion in end demand. Investors need to distinguish short-term price elasticity from medium-term supply expansion risk: lithium, copper, and tungsten still have supportive factors from supply-demand or inventory cycles; aluminum is supported in the short term by a gap but faces higher medium-term supply-addition risk; nickel depends on whether Indonesia’s ore policy truly passes through to raw material trading prices.
Risks
- The nickel sector may face faster capacity expansion and persistent surplus from technological upgrades, along with weaker stainless steel and battery demand.
- The lithium sector faces commodity price volatility, regulatory changes, and weaker-than-expected demand for portable electronics, EV batteries, and BESS.
- The aluminum sector faces weaker property construction and infrastructure demand, softer export orders, lower-than-expected renewable energy capacity additions, and overseas supply expansion in 2027-2028.
- The copper sector faces commodity price volatility, regulatory changes, production disruptions, and weaker demand from property, construction, grid, appliances, machinery, and transport.
- The tungsten sector faces commodity price volatility, regulatory changes, production disruptions, and changes in photovoltaic, steel alloy, and defense demand.
- The conclusions from the expert calls rely on expert assumptions and channel research; if policy execution, demand growth, supply release, or inventory behavior diverges from assumptions, price judgments could shift materially.
What to watch
- Whether Indonesia HPM policy is truly transmitted into limonite trading prices, and the negotiation outcomes between HPAL operators, the government, and miners.
- Whether Indonesian RKAB nickel ore quotas increase in July and whether total ore supply reaches 331 million wet tons.
- Whether 2026 global EV and ESS battery demand growth is realized, especially whether ESS growth can support lithium demand.
- Whether aluminum prices near RMB24,000/ton show seasonal replenishment and whether inventories again build in the low season from June to July.
- The timing of additional overseas aluminum capacity coming online in Indonesia, Vietnam, India, and others, and the restart progress in the EU and the Middle East.
- Changes in copper-related grid investment, power generation, and photovoltaic demand, as well as Freeport Grasberg delay risk and overseas smelter sulfuric acid supply risk.
- The impact of reverse VAT invoicing and fair-competition regulation on scrap-copper rod utilization, output, and spot premia.
- Whether support around RMB650k/ton for tungsten concentrate is effective, and whether hard-alloy producers resume replenishment in July–August.