Base metals outlooks diverge as supply concerns dominate: LME Week

October 27, 2026
Noah
Commodities
0

Record copper prices clash with weaker physical demand and squeezed smelter margins

Discussions on copper during LME Week focused on the gap between record prices and physical demand, pressure on smelter margins and the time needed for new mine supply to reach the market.

Downstream buyers had pulled back as prices rose, according to Tanja Winter, executive director and head of sales rod at European smelter Aurubis. She spoke at Triland Metals’ Global Metals Outlook event in London on Wednesday October 21, attended by Fastmarkets.

“In the months when copper prices were peaking above $14,000 [per tonne], you could immediately see customers were no longer fulfilling their forecasts,” Winter said.

“There is kind of a detachment between the real underlying demand and purchasing behavior.”

LME three-month copper reached record highs of well above $14,000 per tonne in September, Jonathan Simmons, senior research analyst at Triland Metals, said in his opening presentation.

He added that the average intraday trading range for the contract rose by 64% year on year to $267 per tonne in the first nine months of 2026, from $163 per tonne.

Winter said the imbalance between expanding smelting capacity, particularly in China, and slower growth in mine supply had left Aurubis paying to turn concentrates into metal.

“To make it easy: for one tonne of refined copper that we are producing, we need to pay $1,500,” she said. “That’s not healthy.”

Fastmarkets’ copper concentrates TC implied smelters purchase, cif Asia Pacific, was calculated at $(245) per tonne on the same day, down by $3 per tonne from $(242) per tonne a week earlier and by $201.95 per tonne, or 469.1%, from $(43.05) per tonne a year earlier.

This meant smelters buying spot concentrates were paying about 5.7 times more per tonne to secure material than a year earlier.

Smelters in Asia have signaled cuts. South Korea’s LS MnM said at the start of LME Week that it was considering reducing concentrate purchases because of record-low treatment charges (TCs), although it later told Fastmarkets that no 2027 intake reduction target had been finalized.

By-product revenues had helped balance weak terms in recent months “thanks to certain geopolitical situations”, Winter said, but she warned that this support was not guaranteed.

Sulfuric acid, a by-product of copper smelting, has been a key source of that support.

Most of this year’s growth in mine production has come from mines in Mongolia, Indonesia and Russia, according to Kamila Slupek, secretary general of the International Copper Study Group (ICSG).

The ICSG forecasts global refined copper output to rise by 3.4% in 2027, supported by smelter and refinery ramp-ups in Indonesia, India and the EU, improved operating rates in Chile and expansion of SX-EW and secondary capacity, she said.

Participants also awaited direction on the 2027 annual benchmark for copper concentrate treatment and refining charges (TC/RCs).

No formal offers were confirmed during the week, but levels heard in discussions ranged from $(80) to $(10) per tonne, Fastmarkets understands. Many expected talks to move forward at Asia Copper Week in Shanghai on November 17-19.

Near-term aluminium tightness gives way to bearish 2027 outlook

During LME Week, sentiment in the European aluminium market was supported in the near term by the Canada-US tariff dispute, particularly in the duty-paid market.

The two countries have been in a stand-off after the US imposed a 50% tariff on a number of Canadian goods, including aluminium.

In turn, some traders have been holding Canadian tonnes while assessing the most attractive arbitrage opportunities for delivery.

There was growing expectation among market participants that a deal would eventually be reached, which could see Canadian units return to the US and tighten availability in Europe.

“There will be a deal for sure but when? Who knows,” a third trader said.

Fastmarkets assessed the aluminium P1020A premium, in-whs dp Rotterdam at $560-590 per tonne on Friday October 23, up by $10 per tonne at the low end and by $5 per tonne at the high end from $550-585 per tonne the previous week.

However, the outlook for the European aluminium market in 2027 was considerably more bearish during LME Week, with participants expecting increased metal flows into Europe from the Middle East and Asia.

“P1020 is taking its last breath and then it’s going to come off,” one European trader said.

“There’s no denying the availability of metal on the ground is quite tight at the moment [therefore supporting premiums],” a second trader said.

“However, nobody is under any illusion about the amount of metal arriving in Europe in November,” they said.

“They’re not going through [key transit route] the Strait of Hormuz. The Gulf states are the best in the business at finding other routes, it’s quite amazing how efficient they’ve been,” they said.

Upstream, sentiment in the alumina market was cautiously bullish during LME Week, with previously reported high-level deals providing support.

Fastmarkets’ daily assessment of the alumina index, fob Australia, stood at $390.58 per tonne on Monday October 26, unchanged from Monday the previous week.

Despite this, participants remained uncertain about the rally that enabled alumina prices to breach and hold above $390 per tonne during the week.

As the market searched for explanations, several factors came to the forefront: extreme weather, increased smelter consumption and trader positioning.

The Super El Niño weather event, which began in June 2026, led to drier conditions globally, particularly in Indonesia, where lower water levels prevented bauxite-carrying barges from accessing refinery docks and restricted the availability of technical water used to wash bauxite as part of the Bayer process.

Smelter consumption has risen since October 2025, with Indonesian alumina demand growing by an estimated 1.8 million tonnes from 2.2 million tonnes per year in 2025, an 82% year-on-year increase.

Angolan and Middle Eastern production also continued to support alumina prices.

Despite the rise in consumption, many market participants argued that the fundamentals did not reflect the price movement.

“It doesn’t make sense,” a trader said.

“There’s so much material on offer, and there’ve been so many trades, and yet the spot [price] is moving in the opposite direction,” they said.

Some argued that cargo visibility had been restricted, with more API-linked sales and less fixed-price spot liquidity making higher prices achievable.

“The lack of fixed price spot liquidity and availability justifies paying levels that one wouldn’t have to pay if the full available spot volume was open to being sold at fixed prices,” another alumina trader said.

Further bifurcation in zinc concentrates market as by-products support struggling smelter margins

A headline forecast for a 3% recovery in global zinc mine supply, presented by the International Lead and Zinc Study Group (ILZSG) in Lisbon ahead of LME Week, was met with caution, with sources saying underlying market fundamentals pointed to further bifurcation in the concentrates market.

Trader and producer sources told Fastmarkets that increased mine supply from Asmara in Eritrea and Gamsberg II in South Africa was largely sold directly to Chinese smelters and was unlikely to soften TC levels for Western Hemisphere smelters.

High energy prices, low TCs and sulfuric acid prices of $1,000-1,500 per tonne were increasing smelters’ reliance on by-product payables to “keep the global zinc market afloat”, an Asian refiner said.

The inclusion or exclusion of separate payment terms related to by-product payables for precious and minor metals was viewed as a key point of contention in this year’s long-term concentrate contracts.

A benchmark TC may have to be settled without separate payment terms for by-products to maintain its widespread acceptance across the market, Fastmarkets learned.

However, parcels with higher by-product payables were expected to trade at increasingly negative TCs compared with “clean” zinc concentrates with lower by-product content, a consumer said.

Fastmarkets’ twice-monthly assessment of the zinc spot concentrate treatment charge, CIF China, remained deep in negative territory, falling to a record low of $(115)-(150) per tonne on October 9.

The European refined market remained particularly uncertain.

Market participants continued to await updates from the strategic review of Nyrstar’s Budel smelter, production results at Boliden’s Odda smelter and any indications of a future ingot sales strategy following Boliden’s acquisition of Nexa before settling long-term contracts.

With outcomes in Europe’s domestic zinc market still pending, attention turned to offers of ingot on long-term contracts from Asian producers as a potential source of additional supply should the Budel smelter close or delays at Odda persist.

The viability of the arbitrage and volume of material available for shipment from Asia to Europe remained dependent on high EU ingot benchmark premiums above $300 per tonne, Fastmarkets learned.

Nickel surge surprises bearish market after Indonesia production cut reports

The nickel market entered LME Week on a bearish footing after International Nickel Study Group (INSG) forecasts pointed to a slight refined nickel surplus in 2026, despite mining curbs in Indonesia and high sulfur prices for Southeast Asian producers.

LME three-month nickel fell to its lowest level of 2026 in the days before LME Week began.

One nickel trader told Fastmarkets that Indonesian producers had committed to contracts for 2027 and took this as a signal that they had found a solution to sulfur shortages, meaning production could continue unhindered.

“We think nickel is going to stay quite range bound, but we are towards the bottom end of that range,” Morgan Stanley’s Amy Gower said at the LME Week debate.

Gower said, however, that Indonesia’s dominance as a nickel producer meant the outlook could quickly change in response to domestic developments.

Import prices for sulfur into Indonesia remained high, while revisions to mining quotas remained unpredictable.

Tight supply, rather than AI-driven demand, underpins tin fundamentals

Bullish sentiment surrounding the LME’s best-performing metal in 2026 was reflected in an audience poll at the LME Week seminar, with 26.5% of respondents favoring tin as the metal with the most upside potential in 2027.

LME tin prices remained closely linked to global semiconductor sentiment, although sources talking to Fastmarkets said optimism surrounding AI had yet to translate into substantially stronger physical buying.

On the supply side, Chinese diesel export restrictions continued to constrain Myanmar mine output, while Indonesian availability was expected to remain tight for the next three months, leaving both countries as key swing factors in the physical market, Fastmarkets learned.

In Europe, sources described disruptions from the Middle East conflict having structurally altered trade flows with freight costs tripling over the past year, hub reorganizations delaying shipments and elevated LME prices adding to financing costs.

Fastmarkets’ fortnightly assessment of the standard tin 99.9% ingot premium, in-whs Rotterdam was $700-950 per tonne on October 13, down from $900-1,000 per tonne on September 29.