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).

On June 18, the SHFE copper 2507 contract closed at 78,860 yuan/mt. If calculated based on the BC copper 2507 contract price of 70,150 yuan/mt, its after-tax price would be approximately 79,270 yuan/mt. The price spread between the SHFE copper 2507 contract and the BC copper 2507 contract was -410 yuan/mt, with the spread remaining inverted and widening compared to the previous day.

According to the Mining Journal, the Ecuadorian government intends to implement a new mining tax aimed at bridging the fiscal gap, but it may deal a severe blow to the exploration sector. The proposed mining inspection fee (Tasa de Fiscalización Minera) is expected to generate $229 million in annual tax revenue for Ecuador, with the intention of strengthening technical and environmental monitoring of the industry. This tax applies to all levels of mining activities, except for small-scale mining. The Ecuadorian Mining Chamber (CME) has strongly criticized this move, stating, "This matter was never consulted with the industry, and we believe it represents a significant technical obstacle to the responsible and sustainable development of the mining sector." While acknowledging the need for enhanced state control and industry regulation, the CME has criticized the structure of the tax. It is levied per hectare, with different tax rates for projects at various stages. The CME claims, "For medium-to-large-scale mining projects, especially those in the exploration phase, this approach is not feasible." The final tax amount may exceed the exploration investment of the project, the CME added. "This makes regulation an obstacle rather than a tool." Ecuador's largest mining projects include Lundin Gold's Fruta del Norte gold mine and EcuaCorriente's Mirador copper-gold mine. Exploration The CME has also criticized the new tax for imposing additional financial burdens on non-revenue-generating exploration companies, which are in the most vulnerable growth phase. "Although we understand that, as an administrative fee, it does not require formal legal authorization, it must adhere to the constitutional principles of appropriateness, reasonableness, and equality. From its design, this fee is unrelated to the cost of the services it provides or the economic capacity of taxpayers, and it may have an extraordinary impact on exploration activities," the CME stated. The CME's analysis indicates that this fee will make Ecuador less competitive in exploration compared to other Latin American countries. Ecuador's fee is $11.5 per hectare, while Colombia's is $6.7, Chile's is $4.5, and Peru's is $3. "Ecuador is the most expensive country for exploration in the region, and the new tax makes this difference even more pronounced," the CME said. In 2024, exploration investment in Ecuador was $67 million, compared to $493 million in Argentina, $568 million in Peru, and $637 million in Chile. In other aspects, the cost of mine construction in Ecuador is relatively high. Although the country provides mining investors with the ability to sign investment protection agreements, thereby stabilizing their financial situations, its mining law adopts a floating royalty rate that varies between 3% and 8% depending on changes in metal prices. Under the current gold and copper prices, mining companies are facing the situation of the highest royalty rate.

[Toyota Group Plans to Privatize Toyota Industries, Accelerating Its Transformation into a Mobility Company] Toyota Group announced on June 3 that Toyota Motor, Aisin Seiki, Denso, and Toyota Tsusho are participating in a series of transactions aimed at privatizing Toyota Industries through a tender offer for its shares and related transactions. To achieve the privatization of Toyota Industries, the parties will establish a new holding company. Toyota Real Estate will invest approximately 180 billion yen in cooperation with Toyota Group. As a commitment to the transaction, Akio Toyoda, Chairman of Toyota Motor, will invest 1 billion yen. In addition, Toyota Motor will invest approximately 700 billion yen to purchase non-voting preferred shares.

In the first quarter (Q1) of 2025, the smart cockpit market in China is defined by two major trends of technological breakthroughs and the rise of China’s local players.