Material Matters: Copper, Aluminium And Zircon

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A glance through the latest expert views and predictions about commodities: copper and US tariffs; aluminium down but not out; zircon prices rising.

• Copper market awaits US President's decision
• Aluminium bull market might be done and dusted
• New demand supports premium zircon prices

By Greg Peel

Copper

The copper price has drifted from record levels in recent weeks but has remained supported above US$6/lb from inventory positioning and supply constraints, Morgans notes.

US tariff expectations have pulled over half of global visible inventories into Comex warehouses as refined copper is currently exempt from the US’ 50% Section 232 tariff (national security), but an outstanding Commerce Department decision on extending duties to refined metal has been a large driver of this inventory distribution, which has provided price support.

UBS reports a Presidential proclamation published July 30, 2025 stated that by June 30 in 2026 the US Secretary of Commerce would provide the President an update on domestic copper markets, so that the President may determine whether to impose a phased import duty on refined copper of 15% starting on 1st Jan 2027.

No news yet.

UBS notes tariffs imposed under S232 have varied significantly versus proposals and this may be the case for potential US copper tariffs, with a range of potential outcomes and implications for near-term copper price action.

Historically, the Comex (New York) versus London Metals Exchange (which has storage in the US) price differential has been limited, but the prospect of tariffs on US refined copper imports has caused the arbitrage to open, attracting materially higher US imports versus consumption and a build in US inventories, UBS reports

In 2025, the US imported 1.66mt of refined copper, more than double average imports over the previous five years. While US demand has been robust (driven by power generation/grid/AI), the majority of excess imports have built on the Comex/LME US exchanges.

Comex inventories have increased from 600kt and LME (US) from zero to more than 100kt, taking total visible inventories in US to over 700kt. US inventories now account for some 65% of visible global inventory despite the US accounting for less than 10% of global copper demand.

On the supply side, Chilean output has been weak and there has been a run of disruptions through early 2026 including Freeport-McMoRan’s Grasberg closure, ongoing impacts from seismic events in Africa, and weather and operational setbacks across Chile and Australia which have pulled global mine output back to first quarter 2025 levels despite 3.6% growth over 2025 as a whole., Morgans notes.

Sulphuric acid constraints tied to Middle East tensions and China’s export curbs are also weighing on copper cathode production, which accounts for some 20% of global refined output.

On balance, in UBS’ view US imports are likely to moderate if/when S232 tariffs are imposed improving availability of copper to other demand centres (China/Europe/SE Asia).

This is seen as a modest headwind for copper prices.

In UBS’ view, inventory held in US is unlikely to represent a material overhang on the copper market and reduced US imports would not address medium-term deficits in the copper market.

While global inventories are elevated versus historical levels, UBS notes ex-US visible inventories are relatively low, and if US inventory is not re-exported, a modest deficit would result in a tight physical market.

In a scenario that the US clearly states that it does not intend to implement copper tariffs at any point in the future, Comex price would likely move to a discount to LME, UBS suggests, causing a reversal of the arbitrage trade that could potentially see a large proportion of the 700kt of visible copper inventory in the US re-exported, potentially putting sustained downward pressure on prices.

This scenario is seen as unlikely.

In the longer term, Morgans expects the underlying demand and supply dynamic to support stronger prices, with grid build-out and broader electrification underpinning demand growth well beyond the current cycle.

Morgans has upgraded its copper price forecasts by 4%-5% in 2026-29. As a result, its rating on South32 ((S32)) has been upgraded to Accumulate from Hold.

BHP Group ((BHP)) and Rio Tinto ((RIO)) remain core holdings for Morgans but are trading near fair value.

The broker retains Buy ratings on Capstone Copper ((CSC)) and Sandfire Resources ((SFR)) as high-quality copper exposures, with Sandfire offering lower risk and Capstone greater near-term value.

Aluminium

Aluminium had experienced a substantial bull market over the past year or so, the largest since the initial Russia-Ukraine conflict bull market, to the point the price was up some 70% at end-May.

Over June the price fell -20%, but European prices are still up 35% from pre-conflict levels.

This “meme stock-like” performance reflects a confluence of short-term and long-term factors, but for Citi one of the biggest bearish issues has been weaker-than-expected realised demand, which has resulted in visible inventory draws falling short of expectations in recent months, and contributed to a large unwind in investor and physical positioning.

Citi suggests there are other bearish factors (some founded, some not) that the market has focused on. One is an increasingly likely end to the Middle East conflict, which in early July Citi considered founded (but by now the analysts may have wavered).

Fears of a faster-than-previously anticipated return of Middle East supply is overstated, Citi believes, and concerns around China breaching its capacity cap are also seen as unfounded.

Expectations of rising long-term supply expectations rebalancing the market are founded, in Citi’s view.

While many of these concerns are legitimate, Citi thinks the key question is less whether additional supply ultimately materialises and more whether it arrives quickly enough to offset demand growth.

Aluminium market dynamics are different from oil and high producer margins and prices are still warranted. The aluminium market is very different from oil in terms of near-term balances and inventory levels, but similar in that both face the headwind of supply returning to the market and concerns around overcapacity.

Aluminium’s overcapacity may only emerge in two to five years, whereas oil’s is being realised within a matter of weeks.

Zircon

Zircon prices look set to rise further, Morgan Stanley believes, with Iluka Resources ((ILU)) announcing a US$250/t September quarter price hike and China domestic zircon sand up around US$140-US$210/t in three months to US$1600-US$1770/t.

Zircon is primarily used to glaze tiles.

Supply tightness remains supportive for pricing, Morgan Stanley notes, driven by tight heavy metal concentrate (HMC) availability, limited 66% zircon oxide premium grade supply, constrained Senegal shipments following a fire in February, and Indonesian supply yet to recover.

Morgan Stanley sees zircon demand as broadly stable, with India remaining resilient. In China, ceramic demand remains subdued as the tile market continues to operate at relatively low utilisation, although operating rates have improved.

Raw material inventories across concentrators in China remain low, as finished tiles inventories are also declining given seasonal pickup in orders.

China’s January–April import volumes fell -11% year on year, with HMC accounting for 30%-40% of China’s zircon supply, as lower imports leave some separation plants short of HMC.

Higher zircon prices are also encouraging ceramic producers to manage costs by switching from 65% premium grade zircon to 55%-60% material where quality requirements allow, with further substitution expected above US$1,800/t.

Yet while ceramics demand remains sluggish, Morgan Stanley notes there are signs that new demand from solid-state battery electrolytes is emerging, supporting premium zircon.

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