SMM Morning Comment For SHFE Base Metals (Feb 19)

SHANGHAI, Feb 19 (SMM) –

Copper

LME copper opened at $9,384.5/mt overnight, with its center of gravity declining during early trading and bottoming at $9,361/mt. It then climbed steadily, peaking at $9,485/mt before closing at $9,475/mt, up 0.99%. Trading volume reached 15,000 lots, and open interest stood at 295,000 lots. The most-traded SHFE copper 2504 contract opened at 76,830 yuan/mt overnight, bottomed at 76,820 yuan/mt in early trading, and then rose steadily after slight fluctuations, peaking at 77,550 yuan/mt before closing at 77,430 yuan/mt, up 0.61%. Trading volume reached 16,000 lots, and open interest stood at 159,000 lots.

Prices: Macro side, Trump announced that auto tariffs would be around 25%, and large enterprises related to chips and automobiles would return to the US. He may also meet with Putin by the end of this month. The uncertainty surrounding Trump's tariff plans and Russia-Ukraine peace talks reignited risk aversion sentiment. Gold prices approached historical highs again, and copper prices also rebounded. However, gains in copper prices were limited due to the rising center of gravity in the US dollar index. Fundamentals side, copper prices pulled back yesterday, and premiums declined. Market transactions showed some recovery, but end-use consumption remained weak, and destocking of social and enterprise inventories was still slow. Overall, with risk aversion sentiment and market recovery underway, copper prices are expected to find support today.

Aluminum

Yesterday, the SHFE aluminum 2504 contract opened at 20,735 yuan/mt, reached a high of 20,750 yuan/mt, a low of 20,630 yuan/mt, and closed at 20,735 yuan/mt, up 100 yuan/mt or 0.48% from the previous day. LME aluminum opened at $2,645/mt, hit a high of $2,674.5/mt, a low of $2,627/mt, and closed at $2,671/mt, up $26/mt or 0.98%.

Summary: Recently, macro-level bullish news has been frequent, with overseas measures on tariffs and anti-dumping duties emerging one after another. Coupled with domestic policy efforts to promote investment in emerging industries, the market remains optimistic about the medium and long-term outlook for aluminum consumption. However, in the short term, the global aluminum market will undergo structural adjustments due to policy impacts. Risks such as escalating overseas trade conflicts and prolonged domestic demand weakness dragging down aluminum consumption should be monitored. 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, and cost-side support continues to weaken. As both supply and demand are increasing, and post-holiday demand recovery has exceeded expectations, aluminum futures and spot prices remain strong despite the lack of cost support. On the inventory side, current domestic aluminum ingot inventory buildup slightly exceeded expectations, and inventory is highly likely to surpass last year's level by the end of February. The Q1 inventory peak may be revised upward to the range of 900,000-950,000 mt, making it difficult to provide support for further short-term aluminum price increases. On the demand side, last week, the operating rate of leading domestic downstream aluminum processing enterprises continued to recover, up 4.1 percentage points WoW to 60.8%. After the Lantern Festival, aluminum processing enterprises accelerated resumption of work and production. Coupled with the approaching traditional peak season in March, operating rates across sectors still have upside room. However, attention should be paid to the recovery of end-use consumption and changes in the export market. In the future, with increasing PV demand and comprehensive resumption of work and 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 $1,989/mt, consolidated around the daily moving average during the Asian session, and rose further to a high of $1,998/mt as shorts exited during the European session. It eventually closed at $1,996.5/mt, up $14/mt or 0.71%. Overnight, the most-traded SHFE lead 2503 contract opened at 17,150 yuan/mt, briefly touched a high of 17,160 yuan/mt before declining to a low of 17,085 yuan/mt, and then fluctuated rangebound. It finally closed at 17,135 yuan/mt, down 35 yuan/mt or 0.20%.

In the spot market, downstream just-in-time procurement recovered slowly, while refined lead supply increased. Early-week inventory accumulation temporarily weighed on lead prices. This week, some smelters in Hunan resumed production and prioritized shipments under long-term contracts, with no spot quotes available. Traders offered ex-factory cargoes at discounts of 50-0 yuan/mt against the SMM 1# lead average price. In terms of raw material supply, scrap battery recyclers gradually resumed operations. Although scrap battery supply eased slightly, quotes remained firm and were more likely to rise than fall. Import losses widened, coupled with tight overseas silver-lead ore supply, keeping February lead concentrate TC stable at low levels. In the short term, lead prices are expected to fluctuate downward with strong support below. Additionally, Anhui province launched a "You Order, We Help" quality and technical assistance campaign. Further attention is needed on whether secondary refined lead enterprises will adjust production or face cost changes.

Zinc

Overnight, LME zinc opened at $2,868/mt. At the beginning of the session, LME zinc dipped to $2,854/mt before consolidating around the daily moving average. Subsequently, bears exited the market, and LME zinc fluctuated upward, operating overall above the daily moving average. During the night session, the center shifted upward to around $2,890/mt, and it ultimately closed higher at $2,889.5/mt, up by $18/mt or 0.63%. Trading volume increased to 7,747 lots, while open interest decreased by 2,782 lots to 223,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the daily candlestick center moving upward. International disputes eased, leading to the exit of bearish funds, but the US is expected to continue imposing tariffs, limiting the price increase.

Overnight, the most-traded SHFE zinc 2503 contract opened higher with a gap at 24,010 yuan/mt. SHFE zinc fluctuated rangebound around the daily moving average, with an amplitude of less than 100 yuan/mt. It ultimately closed higher at 23,990 yuan/mt, up by 100 yuan/mt or 0.42%. Trading volume decreased to 34,898 lots, while open interest decreased by 1,049 lots to 70,819 lots. Overnight, SHFE zinc recorded a small bearish candlestick, with support provided by the 20-day moving average below. Domestically, more proactive fiscal and monetary policies are expected to be implemented to support private enterprises in actively participating in the "implementation of major national strategies and the development of security capabilities in key areas" and the "program of large-scale equipment upgrades and consumer goods trade-ins." Market sentiment remained positive, and zinc prices fluctuated at highs.

Tin

US President Trump stated on Tuesday that auto tariffs would be around 25%, and he would announce more details on April 2. Trump told reporters, "I might tell you on April 2, but it will be around 25%." Last Friday, Trump mentioned that the tariffs on automobiles could be imposed as early as April 2, with his cabinet members set to submit a report to him on April 1 outlining options for a series of import tariffs. Trump has long pointed out what he describes as unfair treatment of US auto exports in overseas markets. For instance, the EU imposes a 10% tariff on car imports, four times the US passenger car tariff rate of 2.5%. However, the US imposes a 25% tariff on high-profit imported pickup trucks. Trump also stated on Tuesday that a 25% tariff might be imposed on pharmaceuticals and semiconductor chips in April, with at least some of these tariffs expected to increase within the year. In the futures market, during yesterday's night session, SHFE tin prices opened slightly higher but pulled back, adjusting to around 261,700 yuan/mt before the close. The overall open interest in SHFE tin contracts showed relatively small changes. Meanwhile, the spot market remained relatively quiet, with most traders transacting around 10 mt, and the majority of orders being post-pricing orders. Downstream enterprises maintained only a small amount of just-in-time procurement. If SHFE tin prices continue to stay above 260,000 yuan/mt, the spot market is likely to remain subdued.