SMM Morning Comment For SHFE Base Metals (Jan 22)

SHANGHAI, Jan 22 (SMM) –
Copper
Overnight, LME copper opened at $9,178/mt, initially dipping to $9,155/mt before climbing steadily. Near the session's end, it peaked at $9,292/mt and finally closed at $9,291/mt, up 0.27%. Trading volume reached 20,000 lots, and open interest stood at 298,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 75,380 yuan/mt, initially dipping to 75,350 yuan/mt before fluctuating upward. Near the session's end, it peaked at 75,740 yuan/mt and finally closed at 75,700 yuan/mt, up 0.08%. Trading volume reached 21,000 lots, and open interest stood at 160,000 lots. Macro side, Trump did not provide any specific details regarding the imposition of universal tariffs or additional tax surcharges on major trading partners. However, he hinted at the possibility of imposing tariffs on Canadian and Mexican goods as early as February 1. The market struggled with the uncertainty surrounding Trump's tariff policies, with the US dollar index rising initially before falling, and copper prices following a similar pattern. Fundamentally, as the Chinese New Year break approaches, logistics will halt, and enterprises are gradually entering holiday mode. New orders in the market are limited, demand continues to weaken, and spot premiums are maintaining a downward trend. In terms of prices, with tariff policies still unclear, the US dollar is expected to fluctuate at its current high level, making further gains unlikely. Copper prices are expected to fluctuate rangebound at this level today.
Aluminum
Overnight, the most-traded SHFE aluminum 2503 contract opened at 20,335 yuan/mt, hit a high of 20,375 yuan/mt, a low of 20,280 yuan/mt, and closed at 20,340 yuan/mt, down 75 yuan/mt or 0.36%. On Wednesday, LME aluminum opened at $2,681/mt, reached a high of $2,692/mt, a low of $2,632/mt, and closed at $2,651.5/mt, down $36/mt or 1.34%.
Summary: Macro side, with Trump officially taking office, market sentiment remained uncertain regarding tariff policies, leading to fluctuations in the US dollar index and putting pressure on base metals. Fundamentals side, supply disruptions decreased, and with ample supply, the cost side of the aluminum industry eased significantly. The immediate full average cost of domestic aluminum fell to around 19,000 yuan/mt. Specifically, alumina costs accelerated downward over the past week, with reduced purchase willingness for high-priced alumina in the market. Spot alumina prices are expected to continue declining, weakening cost support for aluminum. On the demand side, as the Chinese New Year holiday approaches, aluminum processing plants began their holiday this week, leading to a noticeable weakening in demand. Social inventory may enter the Chinese New Year inventory buildup cycle. In the short term, attention should focus on the pace of changes in domestic and overseas macro sentiment, the impact of falling spot alumina prices on aluminum costs, and the continuation of downstream holiday schedules and pre-holiday stocking.
Lead
Overnight, LME lead opened at $1,971.5/mt, briefly touched $1,975.5/mt during the Asian session, then weakened throughout the European session, fluctuating around $1,950/mt, with a low of $1,942/mt. Before the close, it rebounded to recover losses, finally settling at $1,969/mt, down $3/mt or 0.15%. Overnight, the most-traded SHFE lead 2503 contract opened at 16,650 yuan/mt, slightly rose to a high of 16,675 yuan/mt in early trading, then fluctuated rangebound around the daily moving average, briefly touching a low of 16,605 yuan/mt, and finally closed at 16,640 yuan/mt, down 140 yuan/mt or 0.83%.
In the final week before the Chinese New Year, major lead-acid battery enterprises have entered the phase of arranging holiday schedules. Downstream enterprises have completed pre-holiday stockpiling, and transactions in many regions have significantly declined. It is understood that before this year's Chinese New Year, end-use consumption in the lead-acid battery market for electric bicycles and automobiles was weak. After large-scale stockpiling by dealers in December 2024 and the conclusion of significant purchases in mid-January, producers have gradually begun to suspend operations for the holiday. In the last few trading days before the holiday, suppliers are conducting final sales and limited nearby deliveries. The festive atmosphere is becoming increasingly strong, and pre-holiday lead prices are moderately supported at the bottom, likely to continue fluctuating rangebound.
Zinc
Overnight, Trump signed more than 40 presidential executive orders on his first day in office; TASS: Preparations for a phone call between Putin and Trump have not yet begun; Canadian Prime Minister Trudeau: Supports the idea of a 1-to-1 retaliation against US tariffs; Japanese media: The Bank of Japan is moving toward a rate hike at this week's meeting; Central Huijin increased its holdings in broad-based ETFs in Q4 last year; Ministry of Human Resources and Social Security: Appropriately increase the basic pensions for retirees, with more inclination toward low- and middle-income groups; Ministry of Industry and Information Technology (MIIT): Studying the establishment of the second phase of the National SME Development Fund.
Overnight, LME zinc opened at $2,958/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average. During the European trading hours, it plunged downward, and in the night session, its center moved upward, fluctuating around $2,930/mt. By the end of the session, LME zinc continued to decline, hitting a low of $2,906/mt and closing down at $2,911/mt, a decrease of $46/mt or 1.56%. Trading volume increased to 80,676 lots, while open interest decreased by 1,330 lots to 222,000 lots. Overnight, LME zinc recorded a large bearish candlestick, with resistance from the 40- and 60-day moving averages above and support from the 10-day moving average below. On January 21, LME zinc inventories decreased by 4,000 mt to 195,125 mt, a drop of 2.01%. Zinc prices continued to fluctuate due to uncertainties surrounding Trump's policies, while the reduction in overseas inventories still provided some support for zinc prices.
Overnight, the most-traded SHFE zinc 2503 contract opened at 24,130 yuan/mt. At the beginning of the session, SHFE zinc fluctuated around the daily moving average, reaching a high of 24,220 yuan/mt. Subsequently, with increased short positions, SHFE zinc fluctuated downward below the daily moving average, hitting a low of 24,060 yuan/mt and closing down at 24,085 yuan/mt, a decrease of 115 yuan/mt or 0.48%. Overnight, SHFE zinc recorded a bearish candlestick, with resistance from the 20- and 60-day moving averages above and support from the 10-day moving average below. Most downstream enterprises have already entered the holiday phase, and consumption is gradually weakening. However, macro front news should continue to be monitored, and zinc prices are expected to maintain a fluctuating trend in the short term.

Tin
Trump stated that an investigation into China's trade practices would be conducted, but no new tariff measures were announced. The US dollar index initially fell and then rose, putting gradual pressure on base metals. During the night session yesterday, SHFE tin prices showed a pullback trend. In the futures market, the price of the most-traded SHFE tin contract gradually declined from its recent high to 249,000 yuan/mt, entering a fluctuate rangebound phase. In the spot market, due to the strong performance of the futures market, spot tin prices did not experience a significant drop. Meanwhile, considering that most downstream and end-user enterprises are preparing for the Chinese New Year holiday, coupled with the fact that logistics have largely ceased before the holiday, spot market transactions remained weak and are expected to stay subdued. However, market participants should remain cautious and pay attention to market dynamics and policy risks.
Nickel sulphate
On January 21, the SMM battery-grade nickel sulphate index price was 26,549 yuan/mt, with the quotation range for battery-grade nickel sulphate at 26,340-27,000 yuan/mt, and the average price increased compared to the previous day.
Cost side, LME nickel prices have continued to rise strongly recently, breaking $16,000 today, leading to widened cost support. Currently, the production of nickel sulphate from high-grade nickel matte and intermediate products is experiencing negative profit margins. Demand side, most precursor plants have completed nickel salt stocking for January, with only a small portion still requiring restocking. Spot order market activity remains sluggish. Supply side, finished product inventories at salt plants are critically low, leading to tight supply. Overall, under the pattern of tight supply and rising costs, prices still have room for further increases.