Industrial metals began the week on a subdued note, with liquidity thinned by Lunar New Year holidays across Asia and a U.S. market closure. Copper traded little changed below $12,900 per ton in London, consolidating after weeks of elevated volatility that pushed prices near historic highs. Aluminum edged lower, extending Friday’s pullback following reports that President Donald Trump may narrow the scope of proposed import tariffs.

The pause in trading activity masks deeper structural shifts underway in the global metals market. After a strong rally driven by Chinese buying and a softer U.S. dollar, sentiment has cooled as traders reassess demand fundamentals and policy risks.

Inventory Rebuild Signals Cooling Physical Demand

Copper’s rally has begun to face resistance from weakening industrial orders, particularly in China — the world’s largest consumer of base metals. Near-record prices have dampened purchasing appetite among manufacturers, contributing to a steady rise in exchange inventories.

Stocks tracked by the London Metal Exchange increased again on Monday, pushing combined visible inventories across exchanges in London, Shanghai and New York above one million tons — the highest level since 2003. The rapid drawdown seen earlier in anticipation of potential U.S. tariffs has now reversed, easing immediate supply tightness.

This shift carries psychological significance for traders. Elevated inventories tend to cap upside momentum, especially when speculative flows retreat. The LMEX Index, which tracks six major London-traded metals, hit a record last month but has since moderated as fresh catalysts remain absent.

Tariffs and Policy Outlook Cloud the Landscape

The metals complex remains sensitive to U.S. trade policy signals. Reports that Washington may narrow import tariff measures triggered weakness in aluminum late last week. Any recalibration of tariffs could alter cross-border flows that have distorted inventory patterns in recent months.

At the same time, Federal Reserve policy expectations continue to influence dollar dynamics and commodity pricing. A softer dollar had previously supported metals, but uncertainty over the timing of rate cuts has injected caution into positioning strategies.

Other base metals reflected similarly mixed sentiment. Aluminum traded around $3,066 per ton after Friday’s decline, tin slipped 1.3%, while nickel edged 1.2% higher. The divergence underscores the absence of a unified directional catalyst across the complex.

Market Waiting for a Clear Catalyst

For now, industrial metals appear locked in consolidation. The temporary lull due to holiday closures may exaggerate price stability, but underlying fundamentals suggest a market balancing between residual bullish sentiment and emerging demand fatigue.

Investors will closely monitor Chinese post-holiday activity, U.S. tariff developments and updated macroeconomic data for clearer directional signals. A renewed pickup in infrastructure or manufacturing stimulus in China could reignite momentum, while sustained inventory builds may reinforce a period of range-bound trading.

As liquidity returns later this week, volatility may re-emerge quickly — particularly if policy headlines intersect with shifting physical demand trends.