Prices & Review

Overview (May 2026)

Judging by the record levels reached by major equity indices in the US and Japan, markets appear to be looking through the current energy crisis. Market sentiment remains firmly anchored to the artificial intelligence (AI) theme and continued investment in data centres, electrification and defense, while giving less weight to the risks posed by rising inflation, higher bond yields and elevated energy prices that have come about because of the Iran war.

In the US, CPI rose to 3.8 percent in April, up from 3.3 percent in March and 2.4 percent in both January and February. GDP expanded by 2 percent in the first quarter, following growth of 0.5 percent in Q4’25 and 2.1 percent for full-year 2025. Taken together, these developments suggest that the US economy may be moving further towards a stagflationary environment. Elsewhere, first-quarter GDP growth came in at 5 percent in China, 2.1 percent in Japan, 0.6 percent in the UK, 0.4 percent across the OECD and 0.2 percent in the EU.

Manufacturing is also showing some signs of softening: May flash manufacturing PMI readings weakened in Japan, the EU, Australia and India, were unchanged in the UK and improved in the US. Despite this loss of momentum, all readings remained above the 50 threshold except France, where PMI fell to 48.9 from 52.8, and Germany, where it eased to 49.9 from 51.4. Overall, manufacturing activity continues to hold up in most regions, although conditions in Germany and France warrant closer attention, particularly as producers face headwinds from elevated energy prices and the risk of shortages, especially in diesel.

These pressures are also feeding through to metal producers, both via higher operating and transport costs. Another direct consequence of the Iran crisis has been the disruption to sulphur supply, with potential implications for nickel pig iron, matte and HPAL production, as well as solvent-extraction electro-winning (SXEW) copper production. While higher sulphur prices benefit smelters selling by-product sulphuric acid on a spot basis, part of this upside is being captured by miners selling concentrates through more aggressive treatment and refining charges.

Across the base and battery metals, prices are being driven more by concerns over supply disruptions than by strong underlying demand fundamentals. Smelter outages, disruption risks in Peru, Africa and Indonesia, sulphur and sulphuric acid shortages, elevated diesel and power costs, and policy-related constraints in Indonesia and elsewhere are all tightening supply sentiment, even in markets where exchange stocks remain relatively high or where first-quarter data still points to surplus.