SMM Morning Comment For SHFE Base Metals (Feb 7)

SHANGHAI, Feb 7 (SMM) –
Copper
Overnight, LME copper opened at $9,325.5/mt, then shifted lower, fluctuating rangebound in early trading. It continued to decline during the session, bottoming at $9,258.5/mt, before slightly rebounding towards the close, ultimately settling at $9,289/mt, up 0.2%. Trading volume reached 20,000 lots, and open interest stood at 279,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 76,250 yuan/mt, peaked at 76,340 yuan/mt in early trading, then shifted lower amid fluctuations, bottoming at 76,020 yuan/mt during the session. It slightly rebounded towards the close, finally settling at 76,130 yuan/mt, up 0.29%. Trading volume reached 22,000 lots, and open interest stood at 163,000 lots.
Macro side, US initial jobless claims for the week ending last Thursday were 219,000, compared to an expectation of 213,000. Meanwhile, there is no further news regarding future US tariffs, and the market is awaiting Friday's US non-farm payrolls data. The US dollar index rebounded slightly. Additionally, former President Trump stated that the Interior Secretary and Energy Secretary would work together to increase oil production and lower prices. The decline in crude oil also weighed on copper prices. Overnight, copper prices fell from the previous day's closing levels but remained elevated. Fundamentals side, most downstream copper rod enterprises are gradually resuming production, but in-plant inventories remain ample. Post-holiday social inventories also continue to build. As of Thursday, February 6, SMM data showed that copper inventories in major regions nationwide increased by 107,300 mt from pre-holiday levels to 273,100 mt, which is 12,600 mt lower than the 285,700 mt recorded after last year's holiday. Overall market trading activity remains subdued. In summary, the market is awaiting today's US non-farm payrolls data, and copper prices are expected to seek further direction.
Aluminum
Overnight, the most-traded SHFE aluminum 2503 contract opened at 20,350 yuan/mt, reaching a high of 20,430 yuan/mt and a low of 20,305 yuan/mt, and closed at 20,345 yuan/mt, up 10 yuan/mt or 0.05% from the previous close. On Thursday, LME aluminum opened at $2,620/mt, hit a high of $2,640/mt and a low of $2,608.5/mt, and closed at $2,625/mt, up $1/mt or 0.04%.
On the macro side, initial jobless claims in the US mildly increased last week, and the Bank of England announced a rate cut as expected. With no new tariff-related news, the market is broadly focused on the US January non-farm payrolls report to be released on Friday. If the data remains strong, it could further influence market expectations for future rate adjustments. Fundamentals side, several aluminum smelters in Sichuan are gradually resuming production, adding supply-side pressure. February's average spot alumina price is expected to decline significantly, weakening cost-side support. On the demand side, the market remains in the off-season, but with the end of the Chinese New Year holiday, aluminum processing enterprises are gradually resuming operations, and downstream weekly operating rates have significantly rebounded, indicating improving consumption. In the short term, aluminum prices are expected to fluctuate, with key focus on US economic data, post-holiday inventory performance, and downstream resumption pace.
Lead
Overnight, LME lead opened at $2,004/mt, briefly touching a high of $2,014/mt during the Asian session. Entering the European session, LME lead came under pressure due to a stronger US dollar, dipping to a low of $1,985.5/mt and finally closing at $1,988.5/mt, down 0.9%.

Overnight, the most-traded SHFE lead 2503 contract opened at 17,060 yuan/mt, briefly touching a low of 17,015 yuan/mt in early trading. By the end of the session, it edged up to a high of 17,090 yuan/mt and closed at 17,055 yuan/mt, down 0.2%.
Following the Chinese New Year holiday, upstream and downstream enterprises in the lead industry chain are gradually resuming operations, especially with the recovery of logistics and transportation, leading to a gradual revival in lead ingot trading. Next week, being the week prior to the delivery of the SHFE lead 2502 contract, lead ingot delivery volumes may continue to transfer to social warehouses. Additionally, downstream enterprises are expected to fully resume normal operations after the Lantern Festival, bringing certain rigid demand. Lead prices are expected to fluctuate upward.
Zinc
Overnight, LME zinc opened at $2,792.5/mt. At the beginning of the session, LME zinc briefly moved downward, hitting a low of $2,783.5/mt. Subsequently, bulls increased their positions, driving LME zinc upward to $2,845.5/mt during the night session. However, upward momentum weakened, and it fluctuated near the daily moving average towards the end of the session, ultimately closing higher at $2,825.5/mt, up $35/mt or 1.25%. Trading volume decreased to 10,814 lots, while open interest increased by 1,202 lots to 227,000 lots. Overnight, LME zinc recorded a bullish candlestick, with resistance formed by the 20-day moving average above, and the KDJ indicator showing an upward opening.
Overnight, the most-traded SHFE zinc 2503 contract opened at 23,615 yuan/mt. At the beginning of the session, SHFE zinc fluctuated near the daily moving average. Later, bulls increased their positions, pushing SHFE zinc slightly upward to a high of 23,695 yuan/mt. Subsequently, bears increased their positions, weakening the upward momentum, and the center pulled back to fluctuate near the daily moving average. It ultimately closed lower at 23,635 yuan/mt, down 40 yuan or 0.17%. Trading volume decreased to 56,627 lots, while open interest increased by 949 lots to 98,078 lots. Overnight, SHFE zinc recorded a small bullish candlestick, with resistance formed by the 10-day moving average above.
Zinc Price Outlook: From a macro perspective, in the absence of new tariff-related news, the market holds an optimistic view of tonight's non-farm payrolls data. The US dollar index rebounded, suppressing the performance of base metals. Domestically, although zinc ingot inventory increased after the Chinese New Year, the growth was below expectations. Additionally, the stock market and base metals showed a synchronized upward trend, with base metals broadly rising. Zinc prices are expected to fluctuate in the short term, awaiting guidance from tonight's non-farm payrolls data.

Tin
The US ADP employment increased by 183,000 in January, significantly exceeding the expected 150,000, and the previous figure was sharply revised up to 176,000, indicating resilience in the labour market. However, the January ISM Services PMI stood at 52.8, below the expected 54, suggesting a slowdown in service sector expansion. Regarding interest rate cuts, US Fed's Logan stated that the 2025 options boil down to either resuming rate cuts "as soon as possible" or maintaining rates unchanged for "a considerable period." The latest CME "FedWatch" data shows an 85.5% probability of keeping rates unchanged in March, a 14.5% probability of a 25-basis-point rate cut, a 61.1% probability of maintaining current rates by May, a cumulative 34.7% probability of a 25-basis-point rate cut, and a cumulative 4.1% probability of a 50-basis-point rate cut. This is unlikely to provide support for SHFE tin's upward movement in the near term. In the futures market, the most-traded SHFE tin contract dropped back slightly during yesterday's night session, but overall open interest showed no significant change. The domestic spot market remains sluggish, with some downstream and end-user enterprises resuming work today. However, considering current tin prices and the situation of end-user enterprises, overall order volumes before the Lantern Festival are expected to remain low. Some traders have started preparing post-holiday spot inventories, while smelters' willingness to sell strengthens gradually with the rise in tin prices. The market also needs to monitor macro policies and disruptions in overseas ore supply for their impact on tin prices.
Nickel
Yesterday, mainstream spot premiums for Jinchuan Nickel No. 1 were quoted at 2,300-2,800 yuan/mt (2503 contract), with an average premium of 2,550 yuan/mt, up 50 yuan from the previous trading day. Russian nickel premiums/discounts were quoted at -200 to 100 yuan/mt (2503 contract), with an average of -50 yuan/mt, unchanged from the previous trading day. Futures: On the morning of February 6, SHFE nickel continued the upward trend from the night session, surging 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 also performing strongly. Additionally, rising Indonesian nickel ore prices significantly increased costs. Under cost-based pricing logic, coupled with the strong performance of the base metals sector on the day and the recovery of nickel prices after previous deep declines, nickel prices saw a substantial increase overall.