The base metals sector composite, consisting of the metals trading on the London Metals Exchange, declined in Q2. The composite consisting of LME copper, aluminum, nickel, lead, zinc, and tin prices fell by 1.69% in Q2 but was 4.45% higher over the first six months of 2025.
My Q1 Barchart article on the base metals sector concluded with:
Q2 began with a risk-off bang, sending metals prices substantially lower to levels that offer value. However, markets remain falling knives in early April, which requires caution. Chinese demand is critical for the path of least resistance of base metals prices when the current selling ends. I believe base metals will find higher lows and resume their upward trajectory over the coming weeks and months.
After a volatile quarter caused by the Trump administration’s tariff policy, prices closed Q2 substantially higher than the early April lows. Copper exploded higher to a new record peak in early Q3 after President Trump announced a 50% tariff on the red metal.
The mixed quarter in the base metals sector caused three nonferrous metals to post gains in Q2, while three moved lower. LME copper, aluminum, and lead three-month forwards rallied, while nickel, zinc, and tin prices declined over the three months from the end of March 2025 through June 30, 2025.
U.S. tariffs caused volatility in the base metals arena, as they moved from LME warehouses to the U.S. in anticipation of trade barriers.
Source: LME
The chart shows substantial percentage decreases in copper, aluminum, zinc, and tin stocks at the LME in Q2 and over the first six months of 2025. While lead and nickel inventories rose, the potential for tariffs likely caused the metals to move out of LME warehouses.
Source: macromicro.me
COMEX copper warehouse stocks moved 115,034 tons higher in Q2 2025. However, the combined LME and COMEX stock changes resulted in an overall 5,716-ton reduction in inventories in Q2 2025.
The overall inventory picture in Q2 and over the first six months of 2025 provides supportive underlying fundamentals for the base metals trading on the London Metals Exchange.
COMEX copper futures traded in a wide range in Q2, as the prospects for tariffs caused the futures to rise to a new record high, with the metal moving from LME to COMEX warehouses. The exclusion of copper from the trade barriers led to a price plunge.
The monthly chart highlights the rise of COMEX copper futures to a new all-time high of $5.3740 in March 2025, followed by a decline to $4.03 per pound in April 2025, before recovering to over the $5 per pound level by the end of Q2. COMEX futures moved only 0.08% lower in Q2 but were 24.92% higher over the first six months of 2025. The COMEX futures that settled Q2 at $5.03 per pound are not included in the base metals composite.
The LME three-month copper forward chart shows the forwards did not follow the futures to a new record high in March 2025, as they fell short of the May 2024 peak. LME copper forwards posted a 1.64% Q2 gain and moved 12.56% higher over the first half of 2025. The LME three-month copper forwards settled at $9,869 per metric ton on June 30, 2025.
On July 8, President Trump announced a 50% tariff on copper, which pushed the price to a new record high. The September COMEX futures contract reached a high of $5.8955 per pound.
LME aluminum three-month forwards moved 2.55% higher in Q2.
The monthly chart illustrates the Q2 rise and the 1.80% price increase over the first six months of 2025. LME aluminum forwards settled at $2,597.50 per ton on June 30, 2025.
LME lead three-month forwards moved 1.64% higher in Q2.
The monthly chart illustrates the Q2 rise and the 4.76% price increase over the first six months of 2025. LME lead forwards settled at $2,045 per metric ton on June 30, 2025.
The highly volatile LME nickel three-month forwards moved 4.42% lower in Q2.
The monthly chart highlights the Q2 decline and the 0.74% price decrease over the first six months of 2025. LME nickel forwards settled at $15,215 per metric ton on June 30, 2025.
LME zinc fell 3.54% in Q2.
The monthly chart highlights the Q2 decline and the 7.62% price decrease over the first half of 2025. LME zinc forwards settled at $2,751.50 per metric ton on June 30, 2025.
The highly illiquid three-month LME tin forwards declined by 7.99% in Q2.
The monthly chart shows the Q2 decline and the 15.93% price increase over the first half of 2025. LME tin forwards settled at $33,716.50 per metric ton on June 30, 2025.
The declines in LME stocks in many base metals in Q2 and over the first half of 2025 are bullish fundamental factors for the sector. However, economic growth in China is crucial for the path of least resistance for the nonferrous metals, as China is the world’s leading consumer of base metals.
The Invesco DB Base Metals Fund (DBB) has exposure to the three most liquid base metals: copper, aluminum, and zinc. While copper and aluminum prices moved higher in Q2 and over the first six months of 2025, zinc prices declined.
The monthly chart highlights DBB’s 0.94% marginal rise from $19.19 at the end of March 2025 to $19.37 per share at the end of June 2025. Over the first half of 2025, DBB moved 2.76% from $18.85 to $19.37 per share. At just over the $19 per share level, DBB had over $116.8 million in assets under management. The ETF that owns copper, aluminum, and zinc trades an average of nearly 56,000 shares daily and charges a 0.77% management fee.
As the base metals market enters the second half of 2025, copper, the leading base metal, was marginally above $5 per pound until July 8, when the COMEX futures price exploded to a new record high. Most LME stocks have declined from the end of 2024, and the overall trend since the 2020 pandemic-inspired low remains higher. However, the Chinese economy and U.S. tariffs are the critical factors that could determine the path of least resistance of prices over the coming months. Keep an eye on LME stockpiles as they can provide significant fundamental clues that will impact the price direction.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
