Takeaway

The presenter argues that both copper and zinc markets are experiencing a physical squeeze driven by falling LME inventories, tight concentrate markets, and record backwardation. The speaker sees copper supported by new demand drivers like AI and potential US tariffs, while zinc's rally is purely a physical story that is likely overextended and should revert to lower levels by year-end.

What the presenter said

• Copper and zinc have been the clear outperformers in the base metal suite over the last six months. [00:03]
• Zinc has jumped around 21% in the last six months, significantly outperforming copper's 12% gain. [00:22]
• Both metals have seen declining production, tight concentrate markets, and falling LME inventories, leading to record backwardations. [01:02]
• The presenter notes that despite the squeeze, both metals are forecast to remain in a global surplus this year. [01:17]
• Copper's price is supported by uncertainty over US Section 232 tariffs, financial spillover, and demand from electrification, digitalization, and AI. [01:27]
• Zinc's demand is tied to traditional industrial sectors, with its largest market, China, showing slowing growth. [01:50]
• The US has accumulated over 1.2 million tons of copper stocks onshore, partly due to the threat of Section 232 tariffs. [06:28]
• The benchmark date for a decision on US Section 232 tariffs is September 28th, but the speaker believes no decision is likely this year. [07:04]
• Macro money, driven by the AI narrative, is entering the copper market, particularly on the CME. [09:18]
• Copper is in "uncharted territory" above the old high of 14,500, with an expectation of a correction soon despite talk of 15k-17k levels. [04:34, 05:33]
• The speaker believes zinc is currently overextended and expects it to push higher for another month before reverting to its trend channel around the 3800 area by year-end. [10:14, 10:35]

Trade ideas

None stated. The presenter summarised the market view as bullish for the next month on zinc before a reversion lower by year-end, while a correction is expected in copper despite the strong uptrend.

Levels and data cited

Price Levels: * LME Copper: * Resistance (old high): 14,500 * Support: 14,200 * Support (trend line): 14,100 * Support (previous floor): 13,000 * Potential Targets: 15,000, 16,000, 17,000 * LME Zinc: * Support (year-end expectation): 3,800 * Support: 3,500 (not expected to be reached soon)

Data Cited: * LME zinc price increase (last 6 months): 21% * LME copper price increase (last 6 months): 12% * US copper stocks: increased by 1.2 million tons * LME copper spread: cited at "600 back" * US tech stocks/copper price correlation: highest since 2012 * Galvanization share of Zinc demand: 55%

Risks and what would invalidate this

• Extreme volatility in the copper market.
• Uncertainty surrounding the US Section 232 tariff decision on copper.
• Slowing growth in China's industrial sector impacting zinc demand.
• The potential for a price correction in copper after its significant rally.
• Zinc is viewed as overextended, requiring a rebalancing of global stocks.
• Increased freight costs for zinc as full LME warehouses in Hong Kong force material to be shipped to more distant locations like Singapore.