Macro pressures weigh on metals

Metals prices have retreated sharply since late February, with gold down 13%, silver 24%, copper 10%, and zinc 5%, as geopolitical tensions in the Middle East triggered a macro-driven sell-off, even as battery production surged 48.8% and supply constraints tightened across key commodities.

That is the picture emerging from an April 2026 market update by Appian Capital Advisory, which links the correction to the escalation of the Iran–US–Israel conflict and the closure of the Strait of Hormuz. This development has pushed oil prices higher, reignited inflation fears, and disrupted expectations of interest rate cuts.

Gold and Copper: Sentiment vs. Fundamentals

In the gold market, investor sentiment has cooled significantly. Net long positions held by COMEX money managers have dropped to their lowest level since March 2024, while gold exchange-traded funds recorded sustained outflows through March. Prices, which peaked above US$5,300 per ounce in January, have since fallen back to around US$4,500, reflecting a sharp repositioning rather than a collapse in demand.

Copper presents a more nuanced picture, with volatility masking underlying strength. Shanghai Futures Exchange inventories surged from approximately 140,000 tonnes to 400,000 tonnes in the first two months of the year before falling by 50,000 tonnes in a single week in March, signalling resilient downstream demand in China. 

At the same time, treatment charges for imported concentrates have remained negative since early 2025, underscoring tight supply conditions.

Operational risks for African producers

A more immediate operational risk is emerging for African producers. Disruptions linked to the Strait of Hormuz could tighten sulphuric acid supply, a critical input for Solvent Extraction and Electrowinning (SX-EW) processing, raising the prospect of production constraints for copper cathode operations across the continent, including Namibia.

Zinc markets are facing similar structural pressures. Producing one tonne of zinc requires between 3,000 and 4,000 kilowatt-hours of electricity, leaving smelters highly exposed to rising energy costs. Treatment charges have fallen to near-zero levels, forcing operators to increasingly depend on by-products such as sulphuric acid, indium, and cadmium to sustain margins.

Policy shifts in nickel and lithium

Nickel is being shaped less by demand swings and more by policy. Indonesia, the world’s dominant supplier, is tightening ore quotas and considering export taxes while slowing approvals for 2026 mining plans. Simultaneously, ore prices in the Philippines have risen due to seasonal disruptions and higher fuel costs, narrowing the expected global surplus and providing price support.

Lithium stands out as the strongest demand story despite the broader correction. China’s cumulative production of power and energy storage batteries reached 309.7 GWh in the first two months of 2026, up 48.8% year-on-year, while the average battery size per electric vehicle rose 32.3% to 64.9 kWh. This shift means demand growth is no longer driven solely by vehicle sales volumes, but also by increasing battery intensity and the electrification of heavy-duty transport.

Mounting supply disruptions

On the supply side, disruptions are mounting. China’s Jianxiawo lepidolite mine remains suspended, Zimbabwe’s late-February ban on lithium exports has yet to translate into new permits, and diesel supply constraints in major producing countries such as Australia are raising the risk of further interruptions to mining and logistics.

Across the sector, deeper structural forces continue to shape the outlook. Resource nationalism, permitting delays, and fragmented supply chains are tightening access to new supply, while elevated energy prices are raising the marginal cost of production.

Against this backdrop, demand linked to electrification and the energy transition remains robust, particularly for copper and lithium. The recent sell-off reflects a macro-driven repricing and positioning unwind, not a deterioration in underlying fundamentals, a distinction that suggests the current volatility may be a reset rather than the start of a prolonged downturn.