Industrial metals have suddenly become popular investment targets in China. Recently, the trading volume of aluminum, copper, nickel, and tin futures has surged, leading to a massive influx of individual investors into the market.
As trading skyrocketed, exchanges and regulatory authorities intervened one after another, raising concerns that prices and volatility are moving due to speculative fervor rather than fundamental factors.
Individual investors drive surge in metal trading volume
Recent market data shows that trading in major base metals is increasing at an unusually rapid pace. The combined trading volume of aluminum, copper, nickel, and tin futures on the Shanghai Futures Exchange has surged dramatically in just one month, reaching levels far above recent averages.
Nickel futures have led the rally, with trading volume surging several times over in just one month. In the tin market, exceptionally large daily trading volumes far exceeding usual physical demand were recorded.
These trades are driven not by industrial demand but by speculation in derivatives, with individual investors playing a central role.
Metal trading has become a hot topic on China's SNS platforms and WeChat investment groups.
"Among individual investors, short-term momentum strategies and leverage are becoming increasingly popular." – The Cobey Letter
Such patterns have been repeated in past stock, cryptocurrency, and commodity markets, where individual investor enthusiasm has significantly increased price volatility.
Exchanges are moving to calm the surging metal market
This sharp rally has prompted exchanges to take direct action. Over the past few weeks, the Shanghai and regional futures exchanges have repeatedly tightened margin requirements and strictly revised trading regulations.
"As a result, the Shanghai and Guangzhou futures exchanges have implemented margin increases and stricter trading regulations a total of 38 times over the past two months for speculative suppression purposes. The metal speculation frenzy is not over yet." – Markets Today
While this pattern of unusual but frequent intervention may signal growing concerns about excessive leverage, such measures have historically been implemented to curb speculative inflows and stabilize the market when prices deviate from fundamental supply and demand.
However, repeated regulatory tightening also shows the following patterns.
How quickly trading volume expands in a short period
How uncontrollable trends can become when individual participants reach a threshold.
When speculative growth is rapid, it can lead to a sharp correction in the derivatives market accompanied by excessive leverage.
Precious metals, adding volatility narrative
Meanwhile, the overall metal market is sending different signals. In particular, silver has entered a highly volatile correction phase after recording an unprecedented surge over the past year.
In this environment, some strategists point out that silver and other metals have entered an overbought phase relative to the overall commodity index. Such situations in past cycles have often led to a slowdown in price increases.
On the other hand, some argue that strong industrial demand stemming from structural supply constraints and energy transition technologies will support high prices in the long term.
The reason for such sharply diverging forecasts is that the market is failing to properly distinguish between structural changes and speculative overheating.
Macroeconomic forces lurking behind the rally
Beyond the speculative frenzy among individual investors, the recent surge in metal prices is occurring amid macroeconomic changes. China has been gradually reducing its holdings of U.S. Treasury securities while continuously increasing its gold reserves.
This further reinforces the perception that global capital is gradually moving away from traditional financial assets in pursuit of diversification.
The People's Bank of China has reported that it has been accumulating gold for several consecutive months, and similar trends have been observed in several central banks over the past few years.
While these macro flows do not directly explain the surge in industrial metal speculation, they strengthen the overall trend as all investors, from individual investors to national institutions, are reassessing the role of risk, liquidity, and physical assets in their portfolios.
Speculation by individual investors, strengthened currency exchange regulations, and mixed macroeconomic signals are expected to keep volatility high in the coming months.