Goldman Sachs Meeting: US-China Compete for Metal Resources, Supply Shocks Reshape Pricing

The 2026 LME Asia Week has come to a close. In contrast to half a year ago, when eighty percent of discussions revolved around precious metals, this time the focus has shifted entirely to base metals. The conference unfolded along four main threads: the resilience of China's copper demand, the largest supply shock in the aluminum market's history, the ripple effects of sulfuric acid price increases on nickel, zinc, and copper, as well as the structural variables of resource nationalization and AI infrastructure.

Copper: Scramble between China and the US, tightening supply and demand

Year-to-date, the apparent demand for cathode copper has grown by 4% (reaching 7% in March-April), yet the actual growth rate at the terminal level is only 1%. The discrepancy stems from demand catch-up in the fourth quarter last year, scrap copper substitution, and supplementary stocking by the power grid. In the second quarter, the apparent demand is expected to remain strong, as domestic Chinese inventory has fallen to historical lows, necessitating procurement from abroad.

Meanwhile, US copper imports are anticipated to rebound to a high of 180,000 tons/month in May-June due to strong arbitrage on the New York Mercantile Exchange and expectations of tariff reductions in the China-US Free Trade Agreement. The combined pull from China and the US on the London Metal Exchange, coupled with AI infrastructure demand and the risk of an annual reduction of 800,000 tons in solvent extraction-electrowinning copper capacity in the DRC due to a sulfuric acid shortage, suggests that copper prices still have room to rise. Institutions generally hold tactical long positions in copper of two to three percentages.

Aluminum: Why a 2 million-ton reduction has not ignited prices

Global aluminum supply is expected to suffer a loss of about 2 million tons this year, which can be considered the single largest annual shock in history. However, the aluminum price reaction has been moderate, mainly due to crowded market bulls, a 4% year-on-year decline in China's apparent demand that can fill part of the gap, a nearly 100% year-on-year increase in domestic Chinese inventory, a production run rate approaching the 47 million ton upper limit, and market concerns that shortages only raise premiums rather than futures parity.

China's aluminum export path is constrained by tax regulations; semi-finished products can be exported tax-free, but aluminum ingots must pay a 13% export tax, and aluminum blocks must pay a 30% export tax, making large-scale exports difficult to achieve in the short term. It is expected that overseas spot tightening will further intensify in June-July, and premium strength will eventually be transmitted to aluminum prices.

Nickel: The purest marker of geopolitical games

The tightening of Indonesian ore licenses, cost increases driven by oil prices, and sulfuric acid issues leading to a nearly 30% sequential contraction in high-pressure acid leaching capacity. The reduction in high-pressure acid leaching will be transmitted to a decrease in mixed hydroxide precipitation exports, tightening Chinese supply and supporting the nickel price on the London Metal Exchange. Nickel is the most sensitive marker to the situation in the Strait of Hormuz; if the strait reopens, nickel prices may fall by $1,000, but if it remains closed, the prices will continue to rise.

Zinc: "Metal trap" of high acid prices

The rise in sulfuric acid prices has made Chinese smelters highly profitable, with a large amount of zinc metal being "locked" domestically. However, zinc lacks the processing export rebate mechanism for materials like copper, and the threshold for export activation is extremely high. Until sulfuric acid prices retreat or overseas premiums climb significantly, zinc prices on the LME will receive structural support.

Gold: Silent in the short term, accumulating strength in the long term

Gold was almost "ignored" this time around. The failure of the buying-low trading strategy, a slowdown in central bank gold purchases (nearly zero in February), and sticky interest rates have left gold prices lacking catalysts in the short term. However, as the most liquid non-dollar asset, its long-term allocation value remains prominent.