Industrial metals, led by copper and nickel, continued their spectacular rally on Wednesday, with prices hovering near historic peaks. The surge is fueled by a potent mix of supply constraints from a key producer and shifting expectations around U.S. monetary policy, drawing intense scrutiny from investors and analysts worldwide.
Metals Defy Gravity: Copper's Record Run & Nickel's Supply Shock
Copper prices on the Shanghai Futures Exchange (SHFE) advanced by 0.45% to 103,760 yuan ($14,854.69) per metric ton, trading just below its all-time high of 105,500 yuan. The benchmark three-month contract on the London Metal Exchange (LME) saw a minor correction, easing 0.49% to $13,173.50 a ton after scaling an unprecedented peak of $13,387.50 just a day earlier.
The rally prompted analysts at Citi to revise their near-term copper price target upward to $14,000 a ton, acknowledging that strong market momentum has surpassed both their base and bullish forecasts from December. However, the bank maintained its average price forecast for 2026 at $13,000, cautioning that January 2026 might mark the year's price zenith. Without fresh catalysts, prices could retreat to a more sustainable level around $13,000, falling short of their $15,000 bull-case scenario.
Indonesia's Quota Cut Propels Nickel
Nickel emerged as another standout performer, holding near a 19-month high following a decisive move by Indonesia, the world's top producer. The government's decision to slash the mining quota for 2026 to bolster prices sent shockwaves through the market. On the SHFE, nickel futures skyrocketed 7.3% to 146,770 yuan a ton, after an 8% surge to 147,720 yuan, its highest level since June 2024. LME nickel mirrored the strength, trading at $18,470 a ton after touching a multi-month high of $18,785 on Tuesday.
Despite the explosive gains, some analysts urge caution. Sucden Financial noted that nickel's advance appears "more vulnerable to near-term profit-taking," citing weaker fundamental support compared to the speculative frenzy.
Broader Market Momentum and Macroeconomic Crosscurrents
The bullish sentiment extended to other base metals. Tin joined the rally with Shanghai futures gaining 5.55% and the LME benchmark adding 2.04%. On the SHFE, aluminium rose 1.47%, zinc gained 0.62%, and lead added 1.46%. The LME saw a mixed performance with aluminium steady, while zinc and lead dipped slightly.
Beyond supply dynamics, investors are keenly assessing the Federal Reserve's interest rate trajectory. Comments from Fed Governor Stephen Miran, whose term ends this month, added to the debate. On Tuesday, he stated that current interest rates are "overly restrictive" and advocated for cuts exceeding 100 basis points this year to support economic growth. This dovish tilt is being weighed against ongoing inflation and job market risks.
Geopolitical tensions, including the implications of the U.S. action in Venezuela and the capture of President Nicolas Maduro, also remain in focus for commodity markets, adding a layer of uncertainty.
Market Eyes Key Data for Direction
Traders are now awaiting a slew of economic data releases on Wednesday, January 7, for further direction. Key figures include German unemployment numbers, UK and EU PMI and inflation flashes, alongside U.S. factory orders and ISM non-manufacturing PMI. These indicators will be critical in shaping the narrative around global economic health and central bank policies, which directly influence demand for industrial commodities.
In summary, the metals market is experiencing a historic phase driven by specific supply shocks and broader macroeconomic shifts. While the immediate momentum is strong, especially for nickel and copper, analysts warn of potential volatility ahead as markets digest profit-taking, fundamental data, and central bank signals.
