SMM Morning Comment For SHFE Base Metals (Feb 10)

SHANGHAI, Feb 10 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,411/mt, initially trading steadily before surging to a high of $9,507/mt during the session. It then pulled back to a low of $9,388.5/mt, forming an "inverted V-shape." By the end of the session, it slightly rebounded and closed at $9,440/mt, up 1.63%. Trading volume reached 33,000 lots, and open interest stood at 281,000 lots. Last Friday evening, the most-traded SHFE copper 2503 contract opened at 77,360 yuan/mt, fluctuated upward initially, and peaked at 77,950 yuan/mt during the session. It then fluctuated downward, hitting a low of 77,220 yuan/mt near the session's end. It slightly rebounded by the close, finishing at 77,410 yuan/mt, up 0.89%. Trading volume reached 47,000 lots, and open interest stood at 177,000 lots. Macro side, the latest data showed that US seasonally adjusted non-farm payrolls for January recorded 143,000, significantly below the market expectation of 170,000, marking the lowest level since October last year. Although the US labour market has slowed, it remains robust. Several US Fed officials commented on monetary policy, indicating a low probability of an interest rate cut in the short term. Meanwhile, Trump stated that reciprocal tariff measures would be announced this week, which could enhance the attractiveness of the US dollar, posing bearish pressure on copper prices. Fundamentally, downstream raw material and finished product inventories remain relatively high, and social inventory destocking efforts are weak before end-use demand picks up, entering an inventory buildup phase. However, suppliers hold a relatively tight outlook on future supply and are reluctant to sell at low prices, suggesting that premiums are expected to stabilize. Price side, Trump is set to continue announcing tariff policies this week, and US CPI data will be released. The US dollar index may continue to rise, exerting downward pressure on copper prices. Copper prices are expected to face resistance today.

Aluminum

The most-traded SHFE aluminum 2503 contract opened at 20,530 yuan/mt overnight, hitting a high of 20,600 yuan/mt and a low of 20,515 yuan/mt, before closing at 20,535 yuan/mt, up 40 yuan/mt or 0.20% from the previous close. Last Friday, LME aluminum opened at $2,623/mt, reached a high of $2,651/mt and a low of $2,621.5/mt, and closed at $2,628/mt, up $3/mt or 0.11%.

On the macro front, intensified EU sanctions and US tariff pressures are expected to cause structural adjustments in the global aluminum market in the short term. Continued attention is needed on changes in trade policies in Europe and the US, as well as demand trends in major consumer markets. On the fundamentals side, the pressure of resumed production in the aluminum supply chain has re-emerged, with domestic operating capacity of aluminum expected to rise slowly in February. The average spot price of alumina continues to weaken, driving aluminum costs further downward. As of now, aluminum costs have fallen below 18,000 yuan/mt, with industry profits exceeding 2,700 yuan/mt. On the inventory side, post-holiday inventory buildup continues, with inventories expected to increase rapidly during the week. On the demand side, the operating rate of leading aluminum processing enterprises rose by 5.7 percentage points WoW to 56.8% this week. Although it is currently the off-season, operating rates for aluminum plate/sheet, strip and foil, secondary alloy, and extrusion enterprises have all increased, especially among top-tier automotive extrusion enterprises, which are accelerating their resumption of work, providing support for demand. Additionally, due to financial constraints and limited orders on hand before the holiday, stockpiling was relatively low, which may lead to some stockpiling sentiment after the holiday. As the Chinese New Year holiday ends, aluminum processing enterprises are gradually resuming operations, and the consumer market is expected to recover. In the near term, focus should be on the impact of tariff events, post-holiday aluminum ingot inventory changes, and the pace of downstream resumption of work. SHFE aluminum is expected to remain under pressure at high levels in the short term.

Lead

Last Friday, LME lead opened at $1,991/mt. Driven by the rise in SHFE lead, LME lead fluctuated upward, reaching an intraday high of $2,020.5/mt, the highest level in nearly two months. However, as the US dollar index strengthened overnight, base metals came under pressure, and LME lead reversed its gains, falling back below $2,000/mt and closing at $1,990/mt, up 0.08%.

Last Friday, the most-traded SHFE lead 2503 contract opened at 17,210 yuan/mt. Despite the post-holiday inventory buildup of lead ingots, SHFE lead remained strong, briefly reaching 17,225 yuan/mt during the session, marking a one-and-a-half-month high. In subsequent trading, SHFE lead hovered between 17,150-17,200 yuan/mt, eventually closing at 17,170 yuan/mt, up 0.47%. Its open interest stood at 44,940 lots, down 160 lots from the previous trading day.

During the Chinese New Year, upstream and downstream enterprises had varying holiday schedules, leading to a post-holiday inventory buildup of lead ingots in the domestic market, which inherently does not support strong lead prices. Against this backdrop, the spread between futures and spot prices widened, with the spread in major production areas once expanding to 200 yuan/mt, increasing suppliers' willingness to transfer to delivery warehouses. Lead ingots shifted from in-plant inventory to social warehouses, resulting in a significant visible inventory buildup. This week, downstream enterprises are expected to resume production, potentially driving some restocking demand. Attention should be paid to the pace of lead ingot destocking in the coming days.

Zinc

Last Friday, LME zinc opened at $2,827/mt, initially dipped to $2,819/mt, then quickly climbed to fluctuate around $2,850/mt, reaching a high of $2,875/mt during the session. Near the close, LME zinc declined and ended higher at $2,842/mt, up by $16.5/mt or 0.58%. Trading volume increased to 11,619 lots, while open interest decreased by 866 lots to 226,000 lots. Last Friday, LME zinc formed a bullish candlestick, with support from the 5-day moving average. LME zinc inventory fell by 2,025 mt to 170,450 mt, a decrease of 1.17%. US January seasonally adjusted non-farm payrolls declined more than market expectations, coupled with the recent continuous decline in LME zinc inventory. Low inventory levels supported LME zinc to fluctuate at highs.

Last Friday, the most-traded SHFE zinc 2503 contract opened at 24,015 yuan/mt, initially touched a high of 24,035 yuan/mt, then trended downward, hitting a low of 23,745 yuan/mt near the close, and finally settled lower at 220 yuan/mt, down by 0.92%. Trading volume decreased to 67,770 lots, while open interest fell by 287 lots to 92,762 lots. Last Friday, SHFE zinc formed a bearish candlestick, with resistance from the 40-day moving average. The zinc ingot inventory buildup pace continued for two weeks after the Chinese New Year, coupled with a significant increase in domestic zinc concentrate TCs in February, weakening the fundamental support for zinc prices. SHFE zinc fell back from highs; however, with the peak season for downstream enterprises resuming production approaching, the subsequent decline in zinc prices is expected to be limited.

Tin

Last week, the tin market exhibited strong futures performance and relatively weak spot market activity, primarily influenced by supply-side disruptions and positive macroeconomic signals. The most-traded SHFE tin futures contract continued to rise after the holiday, with significant gains. As of February 7, the average price of SMM #1 tin ingot was 259,300 yuan/mt, up by 300 yuan/mt from the previous week. In terms of supply, armed conflicts in North Kivu Province of the DRC heightened concerns over disruptions in African tin ore supply, while the mining ban in Wa State, Myanmar, remained in place, further supporting expectations of rising tin prices. On the demand side, although most downstream enterprises gradually resumed operations after the Chinese New Year holiday, end-user purchasing willingness was weak, leading to subdued spot market demand and overall low operating rates. Additionally, on the macroeconomic front, US January ADP employment increased by 183,000, far exceeding expectations, indicating resilience in the labour market. However, the ISM services PMI fell short of expectations, and the US Fed's interest rate cut policy remained on hold, which somewhat constrained the upward momentum of tin prices. In the short term, SHFE tin prices are expected to hover at highs. Investors should closely monitor changes in overseas ore supply and macroeconomic policy trends, while being cautious of volatility risks arising from the correction of the spread between futures and spot prices.

Nickel

Last week, nickel prices overall fluctuated upward, with spot prices ranging between 123,200-130,100 yuan/mt, while SHFE nickel futures prices fluctuated between 122,650 yuan/mt and 127,650 yuan/mt. During the week, SHFE nickel continued its upward trend in the night session, rising significantly by 2,790 yuan to 126,010 yuan, an increase of 2.26%. At the start of the new year, base metals broadly rose, with downstream stainless steel showing strong performance. The rise in Indonesian nickel ore prices led to a significant increase in costs, coupled with the recovery of nickel prices after a previous deep decline, resulting in a substantial overall increase in nickel prices. On the news front, following the announcement of the Philippines' "mining ban," futures prices rose for two consecutive days. Meanwhile, Indonesia's Minister of Energy and Mineral Resources expects nickel ore production in 2025 to reach 220 million mt, lower than the previously announced RKAB approval volume of 298.49 million mt, leaving nickel ore supply still uncertain.