Core Viewpoint - The current surge in metal prices, particularly copper and aluminum, is driven by a severe imbalance between weak supply and resilient demand, with significant implications for the commodity market in 2026 [3][4]. Supply and Demand Analysis - The core contradiction in the recent rise of copper and aluminum prices lies in the "extreme fragility of supply" versus the "sustained resilience of demand" [3]. - Copper mining capital expenditure is projected to be only $92.3 billion in 2024, which is just 48% of the peak levels seen in 2013 when adjusted for inflation, indicating a tight supply situation for the next 5-10 years [3]. - Domestic aluminum production capacity has been capped at 45 million tons since 2017, with virtually no new capacity expected by 2026, leading to a situation where supply elasticity has nearly vanished [3]. - Emerging sectors such as photovoltaics, electric vehicles, and data centers account for over 80% of the new consumption growth in non-ferrous metals, demonstrating a profound shift in demand structure [3][4]. Inventory and Market Structure - Since the second half of 2025, global visible copper inventories have been declining, with spot prices shifting from contango to backwardation, indicating immediate supply-demand tightness [4]. - The persistence of spot price backwardation is a key indicator for investors to monitor, as a shift back to contango could signal a demand suppression due to high prices [4]. Silver Market Dynamics - Silver's price performance is influenced by its dual role as both an industrial and financial asset, with significant potential for price increases driven by photovoltaic applications and speculative investment [5][6]. - The anticipated growth in photovoltaic installations is tempered by a decrease in silver consumption per unit due to technological advancements, which could limit demand growth [5]. - The current gold-silver ratio suggests that silver is undervalued relative to gold, which historically leads to a price correction in silver when gold prices rise [5]. Volatility and Market Outlook for 2026 - The market is expected to experience increased volatility in 2026, with metal price fluctuations potentially exceeding 3,000 yuan, necessitating the use of options for risk management [7]. - Structural opportunities will be highly differentiated, with metals like copper, lithium, aluminum, and silver likely to strengthen, while others like zinc, lead, and nickel may remain stagnant without policy or demand support [8]. - The cobalt market is particularly noteworthy, with potential supply reductions of up to 50% due to export quota regulations in the Democratic Republic of Congo, highlighting the need for close monitoring of policy impacts [8]. Macro Narrative Influence - Macro factors, including the Federal Reserve's interest rate policies and potential tariffs on key metals, are expected to play a significant role in shaping metal prices in 2026 [9]. - The current interest rate cuts by the Federal Reserve are viewed as preventive rather than recessionary, which could positively impact metal demand [9]. - Investors are advised to balance industrial insights with macroeconomic trends, adjusting their strategies based on the interplay between these factors [9].