SMM Morning Comment For SHFE Base Metals (Feb 24)

SHANGHAI, Feb 24 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,536.5/mt, fluctuated considerably from the beginning to the middle of the session, peaked at $9,567.5/mt near the close, then pulled back slightly to a low of $9,497/mt, and finally closed at $9,515.5/mt, down 0.44%. Trading volume reached 18,900 lots, and open interest stood at 292,000 lots. Last Friday evening, the most-traded SHFE copper 2504 contract opened at 77,350 yuan/mt, initially peaked at 77,700 yuan/mt, fluctuated downward to a low of 77,400 yuan/mt during the session, then rebounded to form a "V-shape," peaked at 77,680 yuan/mt near the close, and finally pulled back slightly to close at 77,630 yuan/mt, up 0.12%. Trading volume reached 20,000 lots, and open interest stood at 172,000 lots. Macro side, as investors consolidated positions ahead of the weekend, anticipating more inflation data (such as PCE) this week and closely monitoring tariff-related headlines, the US dollar strengthened, weighing on LME copper. Additionally, if relations between Trump, Zelensky, and the EU further deteriorate or new tariff policies emerge, the US dollar may continue to rise, further pressuring copper prices. Fundamentally, copper prices fluctuated, with downstream procurement sentiment remaining moderate, primarily maintaining just-in-time procurement. Affected by tariffs, the export window opened, and smelters began planning exports, reducing the actual tradable copper volume in the market, which may somewhat slow the domestic inventory buildup process. Premiums are expected to rebound this week. In terms of prices, with tariff sentiment fluctuating and domestic policy expectations remaining positive, copper prices are expected to fluctuate at highs today.

Aluminum

The most-traded SHFE aluminum 2504 contract opened at 20,760 yuan/mt last Friday night, hitting a high of 20,875 yuan/mt and a low of 20,760 yuan/mt, before closing at 20,830 yuan/mt, down 45 yuan/mt or 0.22%. On Friday, LME aluminum opened at $2,726/mt, reached a high of $2,736/mt and a low of $2,672/mt, and closed at $2,675.5/mt, down $54.5/mt or 2%.

Summary: On the macro side, potential new trade agreements between China and the US have drawn continued market attention. Fundamentals side, cost-side support continues to weaken; supply side shows slight growth with relatively small overall changes; demand side, affected by rising aluminum prices, end-user enterprises have adopted a wait-and-see approach, with shipments from downstream aluminum semis enterprises showing little improvement. Factory raw material inventory turnover days have struggled to recover, with rigid demand restocking and consumption of finished product inventories being the main focus. On the inventory side, SMM's weekly inventory in major aluminum consumption regions recorded 845,000 mt, an inventory buildup of 27,000 mt. While absolute inventory levels continue to rise, the growth rate has slowed. Most suppliers remain optimistic about aluminum prices in the future, and it is expected that after entering March, the inventory turning point will gradually emerge. With policy support, aluminum ingot inventories are expected to remain low in the long term, and holding back cargoes sentiment in the spot market is likely to strengthen. Under the scenario of strong expectations but weak reality, aluminum prices are more likely to rise than fall, driven by macro sentiment and trading expectations.

Lead

Last Friday, LME lead opened at $2,000/mt and fluctuated downward during the Asian trading session. Entering the European session, LME lead came under pressure and weakened to a low of $1,972.5/mt due to the strengthening US dollar. However, as shorts reduced positions, LME lead rebounded and reached a high of $2,011/mt before closing at $2,002.5/mt, up 1.03%.

On Friday night, the most-traded SHFE lead 2504 contract opened at 17,030 yuan/mt, briefly touching a high of 17,075 yuan/mt in early trading. Due to expectations of the traditional off-season for lead-acid batteries, longs reduced positions, causing SHFE lead to fluctuate downward and hit a low of 16,995 yuan/mt before closing at 17,020 yuan/mt, down 0.49%.

The spread between lead futures and spot prices widened WoW. Even though the SHFE lead 2502 contract delivery has concluded, suppliers have not ceased transferring to delivery warehouses, and social inventory of lead ingots is expected to continue increasing. Meanwhile, secondary lead enterprises have ramped up production, further boosting demand for scrap batteries. This has made scrap battery prices more likely to rise than fall, providing cost support for lead prices. Under the influence of these two factors, lead prices are likely to maintain a high-level consolidation trend.

Zinc

Last Friday, LME zinc opened at $2,917.5/mt. In early trading, it increased slightly to a high of $2,940/mt, then fluctuated downward to a low of $2,881.5/mt. During European trading hours, bulls increased positions, driving LME zinc to rebound from the low and rise steadily, ultimately closing down at $2,920/mt, a decrease of $3/mt or 0.10%. Trading volume fell to 71,886 lots, while open interest increased by 2,715 lots to 230,000 lots. Last Friday, LME zinc formed a bullish candlestick, with the upper Bollinger Bands providing resistance and the 10-day and 40-day moving averages offering support below. On February 21, LME zinc inventory decreased by 2,675 mt to 153,600 mt, a decline of 1.71%. Recently, international regional tensions have shown signs of easing, slightly boosting market confidence. Meanwhile, overseas inventories continued to decline, supporting the upward movement of LME zinc.

Last Friday, the most-traded SHFE zinc 2504 contract opened at 23,980 yuan/mt. In early trading, bulls increased positions, pushing SHFE zinc to fluctuate upward above the daily moving average, with the center oscillating around 24,100 yuan/mt. Later, shorts increased positions, causing SHFE zinc to decline rapidly, but additional long positions helped it recover losses and reach a high of 24,160 yuan/mt. By the end of trading, it dropped back slightly, closing up at 24,130 yuan/mt, an increase of 110 yuan/mt or 0.46%. Trading volume decreased to 53,721 lots, while open interest rose by 4,241 lots to 81,772 lots. Last Friday, SHFE zinc formed a bullish candlestick, with the 40-day and 60-day moving averages providing resistance above and the 10-day and 20-day moving averages offering support below. Fundamentally, domestic spot supply increased slightly, and downstream consumption continued to gradually return to normal. On the macro front, market sentiment has been relatively positive recently, but downstream consumption has not fully recovered, suggesting that zinc prices are likely to continue fluctuating in the current trend.

Tin

International macro side, Fed Chairman Powell reiterated that there is no rush to cut interest rates. US Treasury yields rose, coupled with uncertainties in tariff policies, leading to a decline in market risk appetite, which exerted pressure on tin prices. The US dollar index fluctuated significantly, especially after weak US January retail sales data, pulling back to around 107, providing short-term support for the non-ferrous metals sector. However, Fed Governor Bowman emphasized that more evidence of declining inflation is needed before cutting interest rates. The market remained cautious about the March FOMC meeting, suppressing risk appetite. Domestically, the tin ore market showed a strong futures performance but relatively weak spot conditions. On the supply side, the expected resumption of Myanmar tin ore production has not yet materialized. Domestic tin ore supply remained relatively stable, but inventory pressure was significant. On the demand side, growth in the electronics and new energy sectors supported tin prices, but traditional consumption sectors were weak, with downstream enterprises resuming work at a slow pace and low market trading activity. Regarding social inventory, SMM tin ingot social inventory across three regions and SHFE tin inventory both experienced inventory buildup, while LME tin inventory continued to decline, indicating increased short-term supply pressure. Overall, SHFE tin futures prices are expected to hover at highs in the short term, with a reference range of 262,000 to 268,000 yuan/mt. Tight supply conditions and potential growth in new energy demand will continue to support tin prices, but uncertainties in macro policies and weak traditional consumption may limit upside room. Investors should closely monitor US Fed policy developments and the progress of Myanmar tin ore production resumption while being cautious of volatility risks from the spread between futures and spot prices. As the Two Sessions approach, market expectations for macro policy benefits are increasing, and attention should be paid to statements from relevant representatives. The US dollar index faced downward pressure, boosting SHFE tin prices denominated in yuan, while the strong performance of gold and other precious metals also provided linked support to the non-ferrous sector. From a technical perspective, the most-traded SHFE tin contract recently broke through the 260,000 yuan/mt level, with short-term resistance moving up to around 268,000 yuan/mt and support at 255,000 yuan/mt. In the near term, SHFE tin prices may hover at highs, with mixed bullish and bearish factors. Bullish factors include a weaker US dollar, overseas destocking expectations, tight domestic supply, and policy-driven demand stimulation. Bearish risks include slower-than-expected downstream resumption, expanded spot discounts suppressing purchase willingness, and selling pressure triggered by high prices. Investors should closely monitor US Fed policy developments and the progress of Myanmar tin ore production resumption.

Nickel

Last week, nickel prices showed a fluctuating downward trend overall. Spot prices ranged between 123,200-127,300 yuan/mt, while SHFE nickel futures prices fluctuated between 123,300 yuan/mt and 126,300 yuan/mt. The mainstream spot premiums for Jinchuan No.1 nickel were quoted in the range of 1,700-2,100 yuan/mt, with an average premium of 1,850 yuan/mt, down WoW. Market trading activity was low, and insufficient release of end-use demand from downstream sectors exerted pressure on nickel prices. On the macro front, Fed Chairman Powell's cautious stance on interest rate cuts weighed on base metals, while the upcoming Two Sessions in China also prompted investors to adopt a cautious attitude. In terms of nickel ore supply, Indonesia approved 207 RKABs, with a 2025 quota of 298 million wmt. Mine shipments proceeded normally, but miners showed strong reluctance to sell due to the rainy season. The domestic trade average price of 1.2% grade laterite nickel ore rose to $23.5/wmt, while the CIF price of 1.4% grade nickel ore from the Philippines remained firm at $45.75/mt. Despite tight nickel ore supply, the refined nickel market still faced surplus pressure. China's refined nickel production in February was expected to reach 29,000 mt, down 0.4% MoM, while domestic and overseas inventory levels remained high. As of February 14, refined nickel social inventory in six major regions in China reached 49,459 mt, up 10.67% MoM. The divergence between supply and demand persisted, and downstream smelters might engage in concentrated stockpiling after consuming raw material inventories. In the short term, nickel prices were expected to fluctuate rangebound, with SHFE nickel prices likely to move within the range of 123,150-130,000 yuan/mt.