Base metal prices surged on Friday, propelled by stronger-than-expected U.S. nonfarm payrolls data and rising U.S. Treasury yields. Copper prices climbed nearly $150 per tonne, while nickel futures also posted significant gains amid concerns over production disruptions.
U.S. Jobs Report Exceeds Expectations
U.S. February nonfarm payrolls decreased by 92,000 from the prior month, defying market forecasts of a 59,000 increase. Despite the decline, the data contrasted sharply with economist predictions. The unemployment rate edged up 0.1 percentage points to 4.4%, surpassing estimates of 4.3%. This unexpected outcome sent the dollar index tumbling to 98.83, supporting metal prices.
Middle East Tensions Hit Essential Sulfur Production
Middle East geopolitical tensions have disrupted sulfur production facilities, a critical input for nickel extraction. Indonesia’s nickel operations and select Australian copper refineries face potential cutbacks. China imported 8,387 tonnes of sulfur, accounting for 24% of the global total, with Indonesia sourcing about 50% of its nickel-related sulfur needs from Chinese supplies—roughly three-quarters of its four-part requirement.
Two major copper producers imported 130,000 to 140,000 tonnes, predominantly from China. Australia holds around 90,000 tonnes in remaining inventories, sufficient for one to two months of supply for high-pressure acid leaching (HPAL) nickel plants. Without replenishment, these facilities risk halting output soon.
Supply Chain Vulnerabilities Exposed
Sulfur shortages threaten Indonesia’s nickel producers and Australian copper operations, potentially shifting competition toward non-affected refineries worldwide. As a refining byproduct, sulfur supports ore processing, but its primary demand stems from phosphate fertilizers. Fertilizer plants cannot produce without matching sulfur levels, leading to operational inefficiencies and excess byproducts.
Even as a fertilizer byproduct, Australian copper refineries generate sulfur. However, prioritizing nickel extraction consumes more sulfur centrally, forcing reliance on imports. Producers like those at First Quantum Minerals’ Zambia operations avoid direct sulfur imports by utilizing on-site byproducts, mitigating stockpile risks.
Sulfur prices have already doubled to around $500 per tonne before the tensions, with potential for another 10-15% rise. While some copper smelters can stockpile, direct purchases from Hormuz Strait shipping routes—now up 2% in insurance costs—could accelerate price gains and squeeze metal supply chains.
Precious Metals Follow Suit
Precious metals mirrored the rally, driven by the U.S. economic surprise. CME adjusted precious metal margin requirements downward across gold, silver, platinum, and palladium. Gold and silver margins fell from 9% to 7% and 18% to 14%, respectively, with similar reductions expected for platinum group metals.
