China's Metal Markets Are Stirring - Here's What It Means for Commodity Investors

China's metal markets are waking up post-Lunar New Year, and JPMorgan analyst Dominic O'Kane is tracking some eye-catching trends.

Copper and iron ore prices are at four-month highs, steel output is the strongest since 2021, and base metal inventories are running at record-low seasonal levels.

The takeaway? A tight physical market could be setting the stage for a bullish move—if China's demand kicks in.

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Copper's Mixed Signals

Copper prices have climbed 5% in the last two weeks to around $9,500 per ton, but China's domestic demand isn't quite keeping pace. JPMorgan points out that physical copper demand is lagging seasonal norms, reflected in a 20% drop in China's copper premia.

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Still, O'Kane notes that global macro forces—like a strengthening yuan and anticipation of U.S. metal tariffs—are helping keep LME copper elevated. With inventories at five-year lows, JPMorgan sees copper climbing to $10,400 per ton by the fourth quarter of 2025.

For investors looking to capitalize, United States Copper Index Fund (NYSE:CPER) and Global X Copper Miners ETF (NYSE:COPX) offer exposure to copper's momentum.

Iron Ore Rallies Amid Supply Disruptions

Iron ore prices have surged 10% since January to $105 per ton, fueled by cyclone-related supply hits in Western Australia. While steel rebar demand in China took a weather-related dip, steel production is running at the fastest pace since 2021. JPMorgan is watching China's annual National People's Congress (March 5) for potential policy support that could further boost steel and iron ore markets.

Investors eyeing the iron ore trade might look at VanEck Steel ETF (NYSE:SLX) and iShares MSCI Global Metals & Mining Producers ETF (NYSE:PICK) for broad exposure.

Aluminium & Zinc: Low Inventories, Limited Demand

Aluminium and zinc inventories are at multi-year lows, signaling tight supply. However, demand remains sluggish post-New Year, with aluminium inventories rising by 110kt last week. JPMorgan projects aluminium prices at $2,763 per ton for 2025, but stronger demand signals are needed for a sustained rally.

For those bullish on aluminium, iPath Series B Bloomberg Aluminum Subindex Total Return ETN (NYSE:JJU) offers direct exposure.

Investors Await Next Big Move

China's metal markets are in flux—tight supplies and record-low inventories are colliding with sluggish post-holiday demand.

JPMorgan's O'Kane sees China's upcoming policy moves as a key catalyst for the next leg in metal prices.

With copper and iron ore already running hot, investors should keep an eye on ETFs like COPX, SLX, and PICK to position for the next big move.

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