The Lode

Funds reduced exposure in five of the six LME base metals in the week to 11 September. In the days that followed, Chinese copper premiums surged, zinc inventory extended its broader decline from late August, and the disconnect between Indonesian ore scarcity and abundant LME nickel stocks became harder to ignore.

Those aren’t contradictory readings. They are the same observation arriving in four metals at once: where you look in the chain now determines what you see.

The Chain Has Come Apart

Copper set an all-time high on 10 September and Investment Funds shed 5,692.43 lots of long exposure during the week that contained it — the largest reduction in the complex, and overwhelmingly bulls leaving rather than bears arriving. Six days later, Guangdong high-quality cathode premiums had jumped RMB450/t to RMB700/t as local arrivals fell to 11,200 tonnes, below the cited annual average of 14,000 tonnes, and warrants dropped to only 325 tonnes.

Nickel makes the same point more starkly. Indonesia’s ore constraint is real: Philippine ore imports rose 65.1% year on year to 8.57 million tonnes in the first half, while INSG moved from forecasting a 261,000-tonne global nickel surplus for 2026 in October 2025 to a 32,000-tonne deficit by April. Yet LME nickel stocks reached 278,790 tonnes on 17 September, up 4.7% since 31 July. The constraint is reaching Indonesian ore and processors without creating equivalent scarcity in the Class 1 metal deliverable against the exchange.

Zinc runs the split in reverse. Concentrate treatment charges are below −RMB2,000 per metal tonne domestically and −$120/dmt for imported concentrate, while visible Chinese inventory has fallen from roughly 270,000 tonnes in late August to 213,500 tonnes. Investment Funds nevertheless added 3,305.69 shorts in the latest reporting week. That matters particularly in zinc, where funds account for 31.45% of long open interest and 16.51% of short open interest — their largest footprint on both sides among the six metals tracked here.

Aluminium divides internally rather than simply against the funds. Primary ingot recorded a 26,000-tonne daily draw across three key markets, billet finally edged lower to 152,500 tonnes, while cast aluminium alloy inventory rose for a sixth consecutive week to 34,600 tonnes. Even within the same metal, upstream availability and downstream inventories are no longer delivering a single message.

The common feature is that no single price or inventory series is describing the whole metal. That is worth holding onto when a headline number looks calmer than the situation underneath it.

LME Positioning Intelligence — Copper Longs Liquidate Into the Record

Funds cut net exposure in five of six metals to 11 September. Copper shed 5,692.43 lots of length during the week it set an all-time high.

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China Metals Intelligence — The Physical Signal Strengthens

Copper premiums reversed sharply and zinc extended its broader three-week decline, while aluminium’s different inventory series continued to tell different stories.

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Nickel Analysis — The Quota That Hasn’t Reached the Metal

Indonesia is approving RKAB revisions without disclosing the additional tonnage. Ore is genuinely constrained; LME stocks are rising.

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LME Investment Fund Positioning

Positions as at 11 September 2026, published 15 September. Investment Funds, non-risk-reducing, reported in lots.

Three routes produced the same net direction. Copper and tin reduced exposure primarily through long liquidation; aluminium, zinc and lead through short building. Nickel alone moved the other way. Lot sizes differ by metal, so the positions cannot be aggregated directly: aluminium, copper, zinc and lead contracts are 25 tonnes, nickel six tonnes and tin five tonnes.

Lead remains the structural outlier. It is the only one of the six metals where Investment Funds hold a larger share of short open interest than long, at 23.90% against 13.50%.

China Physical Signals

Shanghai Metals Market, data through 17 September 2026.

Zinc’s path was not a straight line. Stocks stood at 218,200 tonnes on 10 September, built 4,300 tonnes to 222,500 tonnes by 14 September and then fell 9,000 tonnes over the following three days to 213,500 tonnes. The broader late-August-to-17-September decline remains approximately 20.9%, but it has included meaningful intra-period volatility.

SMM’s domestic RMB price quotes are VAT-inclusive and should not be compared directly with LME dollar prices without appropriate adjustment. Inventory definitions also differ by product and geographical coverage and should not be aggregated.

01 — Whether Copper Longs Rebuild

Gross Investment Fund length fell 5,692.43 lots to 64,969.57 in the week containing copper’s record high. The next COTR will show whether that was profit-taking into strength or the beginning of a more persistent reduction in exposure.

02 — Guangdong Premiums After the Roll

High-quality cathode reached a RMB700/t premium, up RMB450/t week on week. Contract rollover contributed to the move, so the more useful test is how much premium strength survives once those mechanics fade and whether low local arrivals persist.

03 — Aluminium’s Thin Short Base

Investment Funds hold only 4.19% of aluminium short open interest, the smallest short-side fund footprint among the six metals. Shorts nevertheless increased by 2,256.18 lots in the latest week while longs were almost unchanged. The scope for further short-covering as a bullish mechanism has therefore narrowed from an already low base.

04 — Zinc’s Stalled Long Side

Zinc longs fell by 216 lots in the latest week while shorts increased by 3,305.69. Across the past two reported weeks, the short book has absorbed 6,373.15 lots of additional selling. That is notable in the market where Investment Funds have their largest open-interest footprint in the six-metal complex, particularly while Chinese visible inventory remains almost 21% below late August.

05 — The Undisclosed RKAB Volume

ESDM says revisions for roughly a dozen nickel companies have begun to be approved but has not disclosed the incremental tonnage. Indonesian industry representatives subsequently said their members had not received revised approvals at that point. The tonnes matter considerably more than the company count, particularly because ESDM has described the process as targeted at production shortfalls and smelter feedstock requirements rather than a general quota expansion.

06 — Whether LME Nickel Stocks Finally Turn

Stocks reached 278,790 tonnes on 17 September, approximately 4.7% above their 31 July level. A sustained shift in that direction would provide much stronger evidence that Indonesia’s upstream ore constraint is beginning to propagate into exchange-deliverable Class 1 metal.

The Bottom Line

Funds spent the latest reporting week reducing exposure to a complex trading near its highs. That is not capitulation — copper set a record inside the reporting week and aluminium’s net long remains close to the top of its recent range — but it is a consistent step back from strength.

The physical evidence is not validating that retreat uniformly. Copper spot availability tightened sharply in Guangdong while funds liquidated longs. Chinese zinc inventory continued its broader decline while funds added shorts. Nickel is the one market where fund positioning and Chinese refined pricing moved in the same direction, even as rising LME stocks demonstrate that Indonesia’s upstream constraint has not translated into Class 1 scarcity.

Nor does the evidence support a straightforward scarcity call across the complex. Aluminium billet remains at a four-year seasonal high and cast alloy has built for six consecutive weeks. SMM continues to describe underlying Chinese zinc order growth as limited. Nickel’s ore constraint is genuine, but abundant exchange inventory sits in the exact class of metal the LME contract prices.

Available metal is tightening selectively while demand stays uneven. The question for the next few weeks is whether those localised physical signals begin to propagate through the chain — or remain isolated from the inventories and prices that dominate the headline market.

The Lode is published every Friday by Bloodstone Research, covering metals, mining and the markets that price them. This document is published by Bloodstone Research for informational and institutional research purposes only. It does not constitute investment advice, an investment recommendation, an offer or solicitation to buy or sell any financial instrument, commodity or security, or a forecast of future performance. Market conditions and data may change without notice. Readers should conduct their own analysis and, where appropriate, seek independent professional advice before making investment decisions.

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