China Commodities Weekly: Tight Copper Concentrate Supply Persists, Lithium Prices Rebound; Coal, Steel, and Cement Under Pressure

Overview

This report is Jefferies' weekly chart-based tracking of Chinese metals, mining, and related commodities, primarily covering copper, aluminum, lithium, thermal coal, steel, and cement. It focuses on high-frequency prices, spreads, inventories, production, operating rates, and demand indicators to assess short-term supply-demand changes and price pressures. The overall conclusion is differentiated: copper is supported by tight concentrate supply, and lithium prices rebounded on improved demand scheduling; aluminum, coal, steel, and cement were more affected by weak demand, elevated inventories, or recovering supply.

Core views

For copper, easing concerns over macro interest rates and changes in copper concentrate pricing mechanisms indicate tightness on the raw-material side. For aluminum, expectations of overseas smelter capacity recovery weighed on prices despite declining Chinese social inventories. For lithium, near-term demand confidence outweighed concerns over supply restarts, supporting a recovery in lithium carbonate prices. For thermal coal, rainy weather suppressed daily power-plant consumption and northern port inventories remained high, weakening prices. For steel, demand was weak while hot-metal production still rose to 2.43mt per day; without effective production discipline, prices and spreads are expected to remain under pressure. For cement, demand was weak during the hot-season off-peak period, and pullbacks following regional price increases drove prices lower.

Analysis framework

The report uses a weekly high-frequency tracking framework and compares spot prices, futures or overseas benchmark prices, processing spreads, social inventories, port inventories, production, operating rates, shipments, and apparent consumption. The analysis focuses not on individual company earnings forecasts but on inferring short-term conditions in Chinese commodities from marginal changes in prices, inventories, and supply and demand.

Methodology notes

• High-Frequency Industry TrackingWeekly Price-Spread-Inventory Dashboard

  Identify short-term commodity supply-demand conditions through week-over-week changes in prices, processing spreads, and inventories.

  Higher prices combined with declining inventories generally indicate improving supply-demand conditions; falling prices, elevated inventories, or narrowing spreads signal insufficient demand, cost pressure, or oversupply.

• Sell-Side Rating FrameworkJefferies 12-Month Total Return Rating System

  Buy, Hold, and Underperform are based on expected total-return ranges over the next 12 months.

  The report discloses Jefferies' general rating methodology but does not provide specific individual stock ratings, target prices, or changes to investment recommendations in this weekly report.

Asset mapping & comparison

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

• Copper

  A cross-over commodity reflecting Chinese metals demand and tight global copper concentrate supply

  Strengths

  The shift in long-term copper concentrate contract pricing toward a spot index plus a floor reflects tight concentrate supply; macro rate-hike concerns have eased.

  Weaknesses

  LME cash copper was only broadly flat this week, with no clear upward price momentum yet.

  Comparison

  Compared with aluminum, coal, and steel, copper has stronger supply-side support.

  Risks

  A renewed rise in macro interest rates, weaker-than-expected demand recovery, or an easing of concentrate tightness.

• Aluminum

  A base metal jointly affected by recovering overseas smelting capacity and changes in Chinese inventories

  Strengths

  Chinese social inventories of aluminum ingots plus billets fell by 85kt, with the destocking pace accelerating slightly.

  Weaknesses

  Both LME aluminum and Chinese spot aluminum declined, while expectations of overseas restarts and expansions pressured pricing.

  Comparison

  Compared with copper, aluminum faces more pronounced supply-recovery pressure.

  Risks

  Further overseas supply releases, continued weak demand, or an unsustained inventory drawdown.

• Lithium

  An upstream material in the new-energy battery supply chain

  Strengths

  Spot lithium carbonate rose 5% week over week, while improved battery-production scheduling strengthened near-term demand confidence.

  Weaknesses

  A possible restart at Jiankengwo remains a potential supply disruption, with limited official confirmation.

  Comparison

  Lithium performed better this week than most traditional cyclical commodities.

  Risks

  Supply restarts exceeding expectations, a decline in demand scheduling, or an interruption in inventory destocking.

• Thermal Coal

  An energy commodity driven by power demand, weather, and port inventories

  Strengths

  If weather turns hotter and daily consumption recovers, demand could improve.

  Weaknesses

  QHD5500 fell 3%, daily consumption at major power plants was seasonally low, and northern port inventories were approximately 29mt.

  Comparison

  Compared with copper and lithium, thermal coal faces more pronounced short-term inventory pressure.

  Risks

  Persistent rainy weather, further accumulation of port inventories, and pressure from imported coal prices.

• Steel

  A core ferrous-chain commodity driven jointly by property, infrastructure, and manufacturing demand

  Strengths

  High-frequency data covering hot metal, production, inventories, and apparent consumption help identify marginal changes.

  Weaknesses

  Falling steel prices, resilient iron ore, and rising coke prices jointly compressed spreads; average daily hot-metal production still rose to 2.43mt.

  Comparison

  Compared with raw materials, steel margins are more directly squeezed by weak demand and rising costs.

  Risks

  A lack of effective production discipline, no improvement in demand, and continued resilience in raw-material prices.

• Cement

  A commodity linked to construction activity and property-chain demand

  Strengths

  Some producers are attempting to improve profitability through self-discipline.

  Weaknesses

  The national average price fell 0.9%; demand was weak, and hot weather typically suppresses construction activity.

  Comparison

  Like steel, cement remains weighed down by weak demand in the construction chain.

  Risks

  Peak-season demand falling short of expectations, continued regional price pullbacks, and limited effectiveness of production self-discipline.

Key data

• LME Cash CopperBroadly flat week over weekU.S. June nonfarm payrolls below expectations eased immediate rate-hike concerns, while the shift in long-term copper concentrate contract pricing toward a spot index also reflected tight concentrate supply.
• LME AluminumWeek over week -2.8%Chinese spot aluminum fell 0.6% week over week, while concerns over overseas smelter restarts and expansions continued to pressure prices.
• Chinese Social Inventories of Aluminum Ingots + BilletsDown 85kt week over week, a 6.3% declineThe pace of inventory destocking accelerated slightly compared with the prior several weeks.
• Chinese Spot Lithium CarbonateUp RMB8k/t week over week, a 5% increaseDemand confidence from increased battery-production scheduling outweighed supply concerns related to a possible restart at Jiankengwo.
• Weekly Lithium Carbonate ProductionWeek over week -3.5%Mainly affected by lower production from conversion of the spodumene route; destocking continued.
• QHD5500 Thermal CoalDown RMB26/t week over week, a 3% declineRainy weather kept daily consumption at major power plants seasonally low.
• Inventories at Major Northern PortsApproximately 29mtInventories reached seasonal highs, weighing on thermal coal prices.
• Average Daily Hot-Metal Production2.43mtProduction continued to rise despite weak demand, leaving steel prices and spreads under pressure in the absence of effective production discipline.
• National Average Cement PriceWeek over week -0.9%Demand was weak, and regions that had previously raised prices saw pullbacks.

Impact & implications

For investment decisions, the short-term Chinese commodities market is better assessed on a commodity-by-commodity basis than through an overall bullish lens. Tight upstream copper concentrate supply and improved lithium demand scheduling are relatively positive signals. Aluminum is constrained by expectations of recovering overseas supply, thermal coal is weighed down by inventories and weather, and steel and cement remain affected by weak demand in the property and construction chain. If demand improves or production discipline strengthens, cyclical commodities such as steel and cement may see pressure ease; if inventories continue to build or restarts are implemented, downside price risks remain.

Risks

• Demand recovery falling short of expectations, particularly in property, construction activity, and industrial electricity consumption.
• Overseas aluminum smelting capacity restarts or expansions exceeding expectations, weighing on aluminum prices.
• Thermal coal port inventories remaining elevated while weather continues to suppress daily power-plant consumption.
• A lack of effective steel production discipline, resulting in resilient supply alongside weak demand.
• Lithium-resource or conversion-capacity restarts exceeding expectations, weakening the short-term price rebound.
• Changes in macro interest rates, exchange rates, and policy may affect commodity prices and the valuations of related assets.

What to watch

• Copper concentrate TC/RC pricing and changes in spot indices.
• The pace of destocking of Chinese aluminum ingot plus billet social inventories and the progress of overseas smelter restarts.
• Battery-production scheduling, weekly lithium carbonate production, and inventory changes.
• Daily consumption at major power plants, northern port coal inventories, and QHD5500 prices.
• Average daily hot-metal production, steel social inventories, apparent consumption, and steel margins.
• Cement prices, the inventory-to-capacity ratio, and demand recovery following hot weather.