(Beijing / New York, Jan 30)
Global commodity markets are experiencing a rare and historic rally, driven largely by strong buying activity from Chinese investors.
The surge comes as the U.S. dollar has fallen to its lowest level in more than four years, making dollar-priced commodities increasingly attractive. As a result, Chinese capital has poured into the sector, pushing prices of metals ranging from tin to silver to record highs.
Trading activity on the Shanghai Futures Exchange (SHFE) has surged sharply. January has already become the busiest month on record for the exchange’s six major base metals, with copper futures recording the second-highest single-day trading volume in history on Thursday (Jan 29).
The rally also shows clear time-of-day patterns. Initial price spikes on the London Metal Exchange (LME) largely occurred during Asian trading hours dominated by Chinese investors. Eric Liu, deputy managing director at ASK Resources, noted that commodity prices have been rising in rotation, with copper previously consolidating around $13,000 per tonne as capital quietly built up.
Macroeconomic forces fuel the rally
This week’s metal price surge is closely tied to broader macroeconomic conditions. A weakening U.S. dollar has enhanced the appeal of commodities, while U.S. President Donald Trump’s apparent indifference toward dollar weakness has encouraged investors to reduce holdings of U.S. Treasuries in favor of real assets.
Tom Price, senior commodities analyst at Panmure Liberum, said cautious investors are increasingly repatriating capital amid concerns that the dollar could weaken further.
Expectations surrounding U.S. monetary policy have also played a role. Although the Federal Reserve kept interest rates unchanged, Chair Jerome Powell highlighted a “notable improvement” in the economic outlook. Markets are also speculating that a future Fed chair could adopt a more dovish stance. Combined with heightened geopolitical tensions under the Trump administration’s assertive foreign policy, demand for physical assets has strengthened.
Price gains outpace physical demand
Copper has long been viewed as a key beneficiary of the global energy transition and the expansion of data centers. Tesla’s plan to invest around $20 billion this year in robotics and artificial intelligence has further reinforced bullish expectations for copper, aluminum, and tin.
According to a Shanghai-based fund manager, expectations for higher copper prices remain intact as long as the U.S. stays on a potential rate-cutting path. Continued investment in AI, semiconductors, and power infrastructure could push prices higher, though the upper limit remains uncertain.
However, risks are emerging beneath the surface. The current rally appears increasingly disconnected from signs of weak physical demand. Meanwhile, the widening contango structure in LME futures suggests that near-term supply remains ample.
A return to rationality?
To curb speculative excesses, the SHFE has introduced cooling measures, including higher margin requirements on certain contracts and trading restrictions on specific accounts in the tin and silver markets. The exchange has also warned investors to strengthen risk awareness and engage in rational trading.
Market observers are also sounding caution. Goldman Sachs’ China equities co-head warned that metal prices may have surged well ahead of real demand. If Chinese physical buyers retreat in response to elevated prices, the market could face a technical or short-term correction.
