Due to Japanese manufacturers' heavy reliance on Middle Eastern aluminum metal supplies, several Japanese enterprises were forced to cut production and urgently seek alternative supply sources after the conflict disrupted key shipping routes. The most visibly affected were automakers and parts manufacturers, such as Toyota Motor and Denso Corp. Industry data showed that approximately 70% of aluminum imports by Japanese domestic automakers came from the Middle East. Since the outbreak of this round of conflict, aluminum prices had risen by approximately 13% cumulatively. One of the enterprises already feeling the impact was Kato Light Metal Industries. The company, headquartered in Aichi Prefecture, produces a wide range of aluminum products, primarily for the automotive sectors.

[Iran Conflict Triggered Aluminum Supply Deficit, Japanese Automakers Under Pressure] Affected by the conflict in Iran, critical shipping lanes were disrupted, forcing Japanese enterprises to cut production and urgently seek alternative supply channels. Japan was highly dependent on aluminum material imports from the Middle East, with approximately 70% of the country's automakers' aluminum semis imports coming from the Middle East region, among which automakers and parts producers such as Toyota and Denso were hit the hardest. Since the outbreak of the Iran conflict in late February, Japan's aluminum alloy prices had risen by approximately 13%.

Early this week, the market continued to trade around the progress of the US-Iran ceasefire and the volatile Middle East situation. Trump agreed to suspend strikes on Iran for two weeks, and Iran also accepted the temporary ceasefire proposal. Risk appetite recovered on a phased basis, and copper prices were briefly boosted. Subsequently, the US-Iran temporary ceasefire agreement was finalized, and the US dollar index pulled back to a one-month low, further supporting a rebound in copper prices. However, as the ceasefire agreement remained fragile, some of the truce terms proposed by Iran had already been violated, compounded by recurring disruptions to shipping through the Strait of Hormuz, the market consistently maintained caution over the sustainability of the agreement. By the latter part of mid-week, Israel sought peace talks with Lebanon, ceasefire expectations warmed again, and overall market sentiment tilted toward optimism. Overall, the macro theme this week remained the marginal easing of Middle East tensions driving risk appetite recovery and the US dollar pullback supporting copper prices, but geopolitical volatility kept the market cautious, and copper prices held up well overall. On the fundamentals side, the copper concentrates tightness narrative continued to ferment. Smelter procurement remained aggressive; meanwhile, sulphuric acid prices surged significantly recently, notably offsetting smelting losses, and the actual profits generated from smelting further intensified smelters' competition for raw materials. Another noteworthy change on the supply side was that the Panamanian government approved First Quantum's plan to process and export stockpiled materials from the shut-down Cobre Panama mine, involving approximately 38 million mt of stockpiled ore and approximately 70,000 mt of recoverable copper. However, this measure did not equate to a formal restart of the mine, and the short-term incremental impact on copper raw material supply remained relatively limited. Affected by the Middle East situation, on one hand, reports emerged that two smelters in Iran had halted production; on the other hand, petrochemical-related product supply in Southeast Asia and Japan was disrupted. Both supply and demand sides saw declines. In contrast, China's consumption remained robust, with notable support from downstream orders. Looking ahead to next week, the macro narrative is expected to remain largely unchanged for now. If the ceasefire agreement holds, risk appetite may continue to recover, and a weaker US dollar is also expected to provide some support for copper prices. However, given the potential for renewed volatility in the Middle East and the fact that shipping disruptions through the Strait of Hormuz have not been fully resolved, upside for copper prices is expected to remain constrained. On the fundamentals side, ore supply tightness and deteriorating smelting margins continue to support the price floor, and copper prices are expected to move sideways with an upward bias in the short term. LME copper is expected to fluctuate between $12,300-12,850/mt, and SHFE copper between 96,000-99,000 yuan/mt. Spot cargo side, as the futures center shifts higher, downstream willingness to chase higher prices may be suppressed, but if the price spread between futures contracts widens only modestly, spot premiums are still expected to remain firm.

Gold has experienced a noticeable setback in recent weeks, even though the macroeconomic environment could have provided support for the precious metal at first glance.

[SMM Analysis: Weak End-User Demand but Firm Costs, High-Grade NPI Prices Rose Steadily] The average SMM 10-12% high-grade NPI price rose 2.2 yuan/nickel unit WoW to 1,089.9 yuan/nickel unit (ex-factory, tax included), while the average Indonesian NPI FOB index price increased $0.39/nickel unit WoW to $138.93/nickel unit. This week, mainstream steel mills released tender prices, and the market came under brief pressure.

[Denso Lowers Full-Year Operating Profit Forecast] Japan's Toyota Motor core parts supplier Denso recently announced that, due to US import tariffs and rising raw material prices, the company has lowered its profit forecast for the fiscal year ending March 2026 by 17.8% from the previously projected 651 billion yen to 535 billion yen (approximately $3.44 billion).