SMM Morning Comment For SHFE Base Metals (Feb 28)

SHANGHAI, Feb 28 (SMM) –
Copper
Overnight, LME copper opened at $9,452.5/mt, dropped back slightly at the beginning of the session, then rose to a high of $9,466/mt. Subsequently, it fluctuated downward, hitting a low of $9,368/mt near the session's end, before rebounding slightly to close at $9,413/mt, down 0.11%. Trading volume reached 18,000 lots, and open interest stood at 295,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,140 yuan/mt, hit a high of 77,330 yuan/mt early in the session, then fluctuated downward, reaching a low of 76,930 yuan/mt near the session's end. It rebounded slightly to close at 77,150 yuan/mt, up 0.16%. Trading volume reached 29,000 lots, and open interest stood at 162,000 lots. Macro side, US initial jobless claims for the week ending February 22 recorded 242,000, the highest since the week ending December 7, 2024, indicating signs of an economic slowdown. However, Trump's clear statement that tariffs on Canada and Mexico will take effect on March 4, with reciprocal tariffs to follow on April 2, overshadowed the signs of slowing economic growth. The US dollar surged, pressuring LME copper, while SHFE copper showed strong bottom support. Fundamentally, as of Thursday, February 27, SMM copper inventories in major regions across China increased slightly by 2,000 mt from Monday to 376,000 mt, up 19,000 mt from last Thursday and 210,000 mt higher than before the Chinese New Year. The weekly inventory growth has significantly slowed this week. Looking ahead to next week, suppliers are expected to hold a tight supply outlook, with rumors of production cuts at some smelters, while demand is expected to improve. In terms of prices, with stocking demand ahead of the weekend, copper prices are expected to stabilize.
Aluminum
Futures Market: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,620 yuan/mt, hit a high of 20,720 yuan/mt, a low of 20,620 yuan/mt, and closed at 20,655 yuan/mt, up 85 yuan/mt or 0.41%. Yesterday, LME aluminum opened at $2,633.5/mt, reached a high of $2,652/mt, a low of $2,620/mt, and closed at $2,631/mt, up $3/mt or 0.11%.
Summary: Macro side, Russia's plan to resume aluminum product exports to the US may help narrow the price spread between domestic and overseas markets. The US's inconsistent stance on tariffs has created market uncertainty, with Trump's tariff threats fueling inflation concerns. Interest rate cut expectations remain unpredictable. As March approaches, the domestic market will focus on the upcoming "Two Sessions" to set economic growth targets and consumption-boosting policies. Fundamentals side, cost support has slightly stabilized, and downstream operating rates are showing mild post-holiday recovery ahead of "golden March and silver April." Attention should be paid to whether end-use consumption can sustain momentum in March. Most suppliers are optimistic about aluminum prices, expecting inventory turning points to emerge gradually in March. With policy support, aluminum ingot inventory may remain low in the long term, and east China has already started destocking, with spot market sentiment to hold back cargoes strengthening. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum is more likely to rise than fall. The possibility of aluminum prices reaching 21,000 yuan/mt cannot be ruled out, especially if tariff issues continue to escalate and macro stimulus leads to stronger-than-expected demand.
Lead
Overnight, LME lead opened at $2,008.5/mt. During the Asian session, it was pressured to a low of $1,991/mt due to the high US dollar index. In the European session, it rebounded as shorts reduced positions, reaching a high of $2,015/mt before closing at $2,008/mt, up 0.22%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,140 yuan/mt. It initially rose to a high of 17,235 yuan/mt before plunging to a low of 17,115 yuan/mt. It slightly rebounded at the close, ending at 17,180 yuan/mt, up 0.09%.
Recently, with the resolution of maintenance and other factors, the supply of primary and secondary lead has increased, while demand in the lead-acid battery sector has shown little marginal change. Spot market circulation remains relatively ample, with most transactions conducted at discounts. Due to the significant spread between futures and spot prices, suppliers have concentrated on picking up goods for transfer to delivery warehouses. Smelters have shifted in-plant inventory to social warehouses, pushing total social inventory to a three-month high. Additionally, entering March, with the Chinese New Year holiday effects dissipating, the lead market's supply and demand are expected to increase simultaneously. In particular, new and resumed secondary lead capacity is expected to gradually ramp up, and lead prices may fluctuate rangebound.
Zinc
Overnight, LME zinc opened at $2,808/mt, fluctuating around the daily moving average in early trading, dipping to a low of $2,801/mt. During European trading hours, shorts reduced positions, driving LME zinc up to a high of $2,846/mt. Entering the night session, LME zinc gradually pulled back below the daily moving average, with the center fluctuating around $2,810/mt by the session's end. It closed higher at $2,809.5/mt, up $1.5/mt or 0.05%. Trading volume increased to 108,000 lots, while open interest decreased by 3,271 lots to 230,000 lots. Overnight, LME zinc recorded a long upper shadow bullish candlestick, with support provided by the lower Bollinger Band. On February 27, LME zinc inventory decreased by 425 mt to 164,950 mt, a decline of 0.26%. The reduction in overseas inventories provided some support for zinc prices. Trump confirmed that tariffs on Mexico and Canada would take effect on March 4, while a US Fed official indicated that interest rates may need to remain unchanged for a considerable period. LME zinc is expected to maintain a fluctuating trend in the short term.

Overnight, the most-traded SHFE zinc 2504 contract opened higher with a gap at 23,655 yuan/mt. In early trading, SHFE zinc fluctuated around the daily moving average, reaching a high of 23,670 yuan/mt. Subsequently, longs reduced positions, causing SHFE zinc to fluctuate downward below the daily moving average. During this period, SHFE zinc attempted to break above the daily moving average but faced resistance and pulled back, closing higher at 23,580 yuan/mt, up 25 yuan/mt or 0.11%. Trading volume decreased to 51,970 lots, while open interest fell by 763 lots to 91,061 lots. Overnight, SHFE zinc recorded a bearish candlestick, with resistance from the 10-day and 60-day moving averages above and support from the lower Bollinger Band below. Fundamentally, there is some expectation of increased supply, while downstream consumption is still recovering. Zinc prices are expected to maintain a fluctuating trend in the short term.
Tin
Hawkish Fed official and Cleveland Fed President Harker stated that interest rates are not yet significantly restrictive and should remain stable for some time. In other words, they may be approaching a neutral environment. In the long term, the US economy is resilient and will adapt to a higher interest rate environment. Given that broader financial conditions remain loose, with stock market valuations elevated and equity risk premiums near zero, Harker's remarks contradict those made by Fed Chairman Powell last month. Harker previously noted that even after last year's interest rate cut, rates remain substantially restrictive. He also emphasized that a patient approach would allow time to monitor the labour market and inflation trajectory, as well as the overall economic performance under the current rate environment. It is crucial to monitor inflation expectations and other indicators to assess whether financial conditions align with the Fed's anti-inflation efforts. Following his remarks, US stocks extended their losses, with the Nasdaq dropping over 2.3% by the close. Harker is a voting member of the FOMC next year. Yesterday, spot market transactions showed some recovery. With a significant pullback in tin prices, some downstream enterprises began purchasing and restocking, with an increase in order volumes. Most traders completed transactions of around one lot, with many clients opting for pricing orders. During the night session, tin prices fluctuated rangebound, with the downward trend temporarily easing. Some downstream enterprises adopted a wait-and-see approach, anticipating better purchasing prices.