Industrial metals have not climbed back to their early-year highs. We do not expect upcoming macro data to support a rebound in the next few weeks. Demand remains weak, and price pressure is still showing up in both spot markets and futures curves.
Import prices in the U.S., China, and Germany are down year over year. China’s producer price index (PPI) is also expected to stay in negative territory for the rest of the year.
Indonesia has cut nickel ore quotas at its largest mine. Rather than lifting prices, this adds downside risk for base metals and points to more near-term headwinds for commodity markets.
These downside risks may also spill over into emerging-market currencies tied to metals. If that happens, many emerging markets may need to keep financial conditions tight.
Industrial metals continue to struggle because demand has not improved. With little evidence of a near-term pickup, any rallies are likely to fade.
Globally, the deflation signal is clear. Import prices in the U.S. and Germany are falling on an annualized basis, and China remains the main concern. China’s official PPI has now fallen for 16 straight months and was down 2.5% in January. As the world’s largest metals consumer, China’s ongoing factory-gate deflation suggests price spikes will likely be sold into.
We saw a similar setup through much of 2025. Hopes for a manufacturing recovery repeatedly ran into weak PMI readings from major economies. That period showed that without a real rise in global industrial activity, metals prices lack fundamental support. Today’s backdrop looks like a continuation of that pattern.
Weakness is also showing up in inventories. For example, London Metal Exchange (LME) copper stockpiles are up more than 15% since the start of the year, reaching a six-month high. For derivatives traders, this may support strategies such as selling out-of-the-money call options on copper futures or using bearish put spreads. These trades can benefit if prices keep falling or move sideways.
On the supply side, Indonesia’s nickel quota cuts look less like a bullish catalyst and more like evidence of soft demand and surplus management. That strengthens the case for bearish positioning, such as buying puts on nickel-focused ETFs or on mining stocks. If prices stay under pressure, producers may face tighter margins in the near term.
A weaker metals outlook also creates headwinds for commodity-linked currencies. The Australian dollar has already dropped below 0.6500 against the U.S. dollar as iron ore prices weakened, and further softness is possible. This setup may also favor bearish trades in currencies like the South African rand and the Chilean peso, using either options or futures.
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