SMM Morning Comment For SHFE Base Metals (Feb 5)

SHANGHAI, Feb 5 (SMM) –
Copper
Overnight, LME copper opened at $9,134.5/mt, rose slightly at the beginning of the session before fluctuating downward, hitting a low of $9,103.5/mt. It then climbed steadily, reaching an intraday high of $9,185/mt, but the center edged lower towards the end of the session, finally closing at $9,174/mt, up 0.7%. Trading volume reached 15,000 lots, and open interest stood at 282,000 lots. The most-traded SHFE copper 2503 contract was closed overnight. Macro side, the US previously delayed imposing import tariffs on goods from Mexico and Canada, easing trade tensions. However, concerns over trade tensions and global economic growth persist. Meanwhile, US job vacancies hit their lowest level since September last year, and December's factory orders recorded the largest monthly decline since June 2024. Weak data led to a decline in the US dollar, providing some support to LME copper, though gains were limited amid concerns over demand prospects. Fundamentally, copper social inventory increased before the holiday. According to downstream enterprises, many companies started operations later than usual or had pre-holiday stockpiling for post-holiday production. Overall consumption is expected to recover gradually. In summary, on the first trading day after the holiday, copper prices are expected to see limited gains.
Aluminum
SHFE aluminum was closed overnight due to the Chinese New Year holiday. On Tuesday, LME aluminum opened at $2,622/mt, reached a high of $2,644.5/mt, a low of $2,611/mt, and closed at $2,629/mt, up $8.5/mt or 0.32%.
On the macro side, the US tariff hike policy has been implemented, with Trump signing an executive order on February 1 to impose a 10% tariff on goods from China. China has filed a complaint with the WTO dispute settlement mechanism and will take corresponding countermeasures. The US Fed paused rate cuts in January, maintaining the federal funds rate target range at 4.25%-4.50%, in line with market expectations. Fundamentals side, supply disruptions have decreased, and domestic aluminum operating capacity is expected to remain stable in February. Spot alumina average prices are expected to decline significantly in February, likely driving aluminum costs further downward, weakening cost-side support. On the demand side, the market is currently in the off-season. However, as the Chinese New Year holiday ends, aluminum processing enterprises will gradually resume production, and consumption is expected to recover. In the short term, aluminum prices are likely to fluctuate downward. Key focus areas include developments in the tariff issue, aluminum ingot inventory changes during the holiday, and the pace of downstream resumption after the holiday.
Lead
Overnight, LME lead opened at $1,945/mt, fluctuated rangebound during the Asian session, and fluctuated downward during the European session, hitting a low of $1,940/mt. By the end of the session, the weakening US dollar eased resistance, leading to a rebound and recovery, with prices peaking at $1,973.5/mt and closing at $1,969.5/mt, up 1.26%.
As the Chinese New Year holiday approaches, logistics vehicles have further decreased, nearing a complete halt, and suppliers in the Jiangsu, Zhejiang, and Shanghai markets have rarely quoted prices. On Friday morning, SHFE lead fluctuated upward, with some suppliers making final deliveries, including purchases by downstream enterprises over the past two days and some transfers to delivery warehouses. Quotes in the secondary lead market were also scarce, with individual suppliers offering ex-factory prices at a premium of 50 yuan/mt against the SMM 1# lead average price, while most enterprises refrained from shipments or quotations. By Friday, downstream enterprises had largely ceased inquiries, and the spot market exhibited a state of nominal prices without transactions.

Inventory: On February 4, LME lead inventory increased by 250 mt to 220,875 mt, up 0.11%. As of January 27, the total social inventory of SMM lead ingots across five regions stood at 39,200 mt, down 6,700 mt from January 20 but up approximately 100 mt from January 23.
During the Chinese New Year holiday, most downstream battery producers are on holiday, with only a few enterprises continuing production, primarily consuming their own lead inventory. Logistics no longer support spot transactions. Additionally, some primary and secondary lead enterprises are conducting shift work during the holiday, with production cuts and holidays on the supply side being far less significant than on the consumption side. This week, attention will focus on lead ingot inventory buildup and the impact of downstream resumption progress on lead price trends.
Zinc
Overnight, US job vacancies hit their lowest level since September last year; Trump signed a memorandum to block Iran's nuclear weapons program and restrict its oil sales; Crypto Czar David Sacks is studying the feasibility of Bitcoin reserves; Morgan Stanley no longer expects the US Fed to cut interest rates in March; China's Ministry of Commerce has added the US-based PVH Group and Illumina Inc. to its unreliable entity list; China will impose an additional 10%-15% tariff on certain imports originating from the US.

Overnight, LME zinc opened at $2,817/mt. At the beginning of the session, LME zinc fluctuated along the daily moving average. By the European trading hours, it quickly declined to a low of $2,784.5/mt. Subsequently, bulls increased their positions, pushing LME zinc upward to a high of $2,834/mt during the night session. It then fluctuated near $2,818/mt at the end of the session and closed higher at $2,812/mt, up by $3.5/mt or 0.12%. Trading volume decreased to 10,798 lots, while open interest increased by 2,119 lots to 228,000 lots. Overnight, LME zinc recorded a small bearish candlestick, with resistance from the 20-day moving average above and support from the 5-day moving average below. The US delayed imposing tariffs on Canada and Mexico by one month, easing market concerns. However, worries about subsequent demand persist. With US job vacancies at their lowest level since last September and the likelihood of a US Fed interest rate cut in March decreasing, LME zinc is expected to fluctuate downward in the short term. Attention should be paid to the release of subsequent domestic policies.

Overnight, SHFE zinc was closed due to the Chinese New Year holiday. After the holiday, downstream and end-user sectors of zinc will gradually resume operations, but support for zinc prices remains weak. In the short term, zinc prices are expected to fluctuate downward.
Tin
On February 1, 2025, the US government announced a 10% tariff hike on all Chinese exports to the US, citing issues such as fentanyl. The unilateral tariff hike by the US seriously violates WTO rules, not only failing to address its own problems but also disrupting normal Sino-US economic and trade cooperation. According to the "Customs Law of the People's Republic of China," the "Foreign Trade Law of the People's Republic of China," and other relevant laws and international legal principles, and with the approval of the State Council, China will impose additional tariffs on certain US-origin imports starting February 10, 2025. The details are as follows: 1. A 15% tariff will be imposed on coal and liquefied natural gas. 2. A 10% tariff will be imposed on crude oil, agricultural machinery, large-displacement vehicles, and pickup trucks. 3. For US-origin imports listed in the annex, additional tariffs will be imposed on top of the current applicable tariff rates, while existing bonded and tax reduction/exemption policies remain unchanged. The additional tariffs will not be exempted. In the futures market, the price of the main LME tin futures contract climbed to $30,270/mt. Meanwhile, in the domestic spot and futures markets, trading was suspended due to the Chinese New Year holiday. Some upstream and most downstream and end-user enterprises entered the holiday period. There were no tin ingot transactions in the spot market, and it is expected that some downstream end-user enterprises will resume work gradually starting from the eighth day of the lunar new year, with the spot market gradually recovering trading activities.