SMM Morning Comment For SHFE Base Metals (Feb 18)

SHANGHAI, Feb 18 (SMM) –

Copper

Overnight, LME copper opened at $9,398.5/mt, initially bottoming at $9,379.5/mt amid fluctuations. The center then rose, peaking at $9,425.5/mt during the session, followed by slight fluctuations and a decline towards the close, ultimately settling at $9,382.5/mt, down 0.87%. Trading volume reached 15,000 lots, and open interest stood at 300,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 76,740 yuan/mt, initially bottoming at 76,680 yuan/mt. The center then rose, peaking at 77,030 yuan/mt during the session, before declining and consolidating sideways towards the close, ultimately settling at 76,860 yuan/mt, down 0.81%. Trading volume reached 22,000 lots, and open interest stood at 169,000 lots.

Prices: Macro side, US Fed - Harker stated that current economic conditions support maintaining a stable interest rate policy for now, while Bowman emphasized the need for stronger confidence in inflation decline before further rate cuts. Inflation is expected to decline, but upside risks remain. The US dollar index remained stable. After contract rollover, short covering subsided, and copper prices shifted lower. Fundamentals side, under the high contango structure, suppliers actively bought, but the spot market remained inactive. Downstream processing enterprises still expect copper prices to decline further. Overall, with the US dollar index fluctuating at low levels and major domestic meetings gradually unfolding, copper prices are expected to find support at the bottom today.

Aluminum

Yesterday, the most-traded SHFE aluminum 2504 contract opened at 20,645 yuan/mt, reached a high of 20,690 yuan/mt, a low of 20,585 yuan/mt, and closed at 20,660 yuan/mt, down 50 yuan/mt from the previous day, with a 0.24% increase. Yesterday, LME aluminum opened at $2,635/mt, hit a high of $2,651/mt, a low of $2,613/mt, and closed at $2,646.5/mt, up $9/mt, with a 0.34% increase.

Summary: Recently, macro factors have been mixed. Domestically, efforts to boost consumption continue, while overseas trade barriers are intensifying. However, domestic enterprises and market sentiment have shown limited response to this. In the short term, the global aluminum market is expected to undergo structural adjustments influenced by policies, and attention should be paid to changes in European and American trade policies and major consumer market demand. Fundamentals side, the pressure of resuming production in the aluminum supply side has re-emerged, with domestic operating capacity of aluminum expected to rise slowly in February. Alumina average spot prices continue to weaken, driving aluminum costs further downward, weakening cost-side support. Despite both supply and demand showing growth and post-holiday demand recovery exceeding expectations, aluminum futures and spot prices remain strong even as cost support diminishes. Inventory-wise, the market is still in a post-holiday inventory buildup phase, with inventories expected to continue rising rapidly this week. Demand side, the operating rate of leading domestic aluminum downstream processing enterprises significantly rebounded this week, up 5.7 percentage points WoW to 56.8%, mainly driven by post-Chinese New Year resumption of production. However, recovery across sectors remains uneven. In the future, with increasing PV demand and full resumption of production by end-users, and limited supply-side increments, aluminum prices are expected to maintain high-level fluctuations in the short term.

Lead

Overnight, LME lead opened at $1,983.5/mt, fluctuated upward during the Asian session, and continued to rise in the European session, reaching a high of $2,006.5/mt. It then pulled back under pressure and finally closed at $1,982.5/mt, up $0.5/mt or 0.03%. Overnight, the most-traded SHFE lead 2503 contract opened at 17,200 yuan/mt, hit a high of 17,250 yuan/mt in early trading before declining to a low of 17,150 yuan/mt. It then slightly rebounded and finally closed at 17,180 yuan/mt, up 40 yuan/mt or 0.23%.

Over the weekend, lead ingots continued to arrive at social warehouses, fulfilling expectations of inventory transfers for delivery. Early this week, inventories are expected to continue rising. Recently, although downstream enterprises have mostly resumed operations, their demand for lead ingots has been weak. Spot prices in various regions have shifted from premiums to discounts, with the discount range widening. As of February 17, suppliers in Henan and Hunan quoted ex-factory prices for self-picked cargoes at discounts of 50-0 yuan/mt against the SMM 1# lead average price, with the spread between futures and spot prices exceeding 200 yuan/mt. After the Lantern Festival, scrap battery supply has slightly eased, but secondary refined lead production is not expected to see significant growth in February. Secondary refined lead was quoted at discounts of 150-0 yuan/mt against the SMM 1# lead average price ex-factory. Downstream enterprises have more options for rigid demand, and the existing lead ingot inventory is being consumed slowly. In the short term, lead prices are likely to remain under pressure.

Zinc

Overnight, LME zinc opened at $2,841/mt. At the beginning of the session, LME zinc fluctuated upward above the daily moving average. During European trading hours, it briefly declined, with its center shifting downward to consolidate near the daily moving average. Entering the night session, LME zinc accelerated upward, reaching a high of $2,876.5/mt by the end of the session and ultimately closing higher at $2,871.5/mt, up by $33/mt or 1.16%. Trading volume decreased to 6,203 lots, and open interest fell by 756 lots to 226,000 lots. Overnight, LME zinc recorded a bullish candlestick, with resistance from the 40-day moving average above and support from the 10-day moving average below. The weak performance of the US dollar overnight provided support for zinc prices, while the exit of bearish funds led to an upward shift in LME zinc's center.

Overnight, the most-traded SHFE zinc 2503 contract opened at 23,830 yuan/mt. At the beginning of the session, SHFE zinc fluctuated around the daily moving average. Subsequently, the exit of bearish funds caused SHFE zinc's center to shift upward above the daily moving average. By the end of the session, it accelerated upward, reaching a high of 23,985 yuan/mt and ultimately closing higher at 23,970 yuan/mt, up by 155 yuan/mt or 0.65%. Trading volume decreased to 37,178 lots, and open interest fell by 844 lots to 74,084 lots. Overnight, SHFE zinc recorded a small bullish candlestick, with the MACD bullish bar expanding. Domestic macro sentiment improved, but with consumption falling short of expectations, social inventory continued to accumulate, suggesting that zinc prices may primarily maintain sideways movement.

Tin

DeepSeek has recently sparked a capital frenzy in the A-share market, driving up multiple technology-related sectors and attracting significant foreign capital into the Chinese market. DeepSeek is also prompting global investors to reassess the investability of China. According to a Goldman Sachs report, global hedge funds have been heavily buying Chinese stocks for most of this year, with the buying momentum in early February reaching its strongest level in four months. Incomplete statistics show that over the past month, global hedge funds have driven the total market capitalization of onshore and offshore markets to increase by more than $1.3 trillion (approximately 9.43 trillion yuan). Investment banks such as Morgan Stanley and Deutsche Bank have expressed optimism about the Chinese stock market, believing that technological breakthroughs like DeepSeek and policy dividends will further drive market growth. In the futures market, SHFE tin prices during yesterday's night session opened slightly higher and then stabilized, adjusting to around 262,500 yuan/mt before the close. The overall open interest in SHFE tin contracts showed relatively small fluctuations. Meanwhile, the spot market remained relatively quiet, with most downstream enterprises adopting a wait-and-see approach. Spot market transactions yesterday were mainly conducted through a pricing-on-delivery model. Under the current high-level price consolidation, the spot market is likely to remain subdued.