SMM Morning Comment For SHFE Base Metals (Mar 3)

SHANGHAI, Mar 3 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,334/mt. In early trading, the center moved higher, reaching a peak of $9,382/mt, then fluctuated downward to a low of $9,325/mt during the session. By the end of trading, it rebounded and closed at $9,361/mt, down 0.55%. Trading volume reached 21,000 lots, and open interest stood at 293,000 lots. Last Friday evening, the most-traded SHFE copper 2504 contract opened at 76,850 yuan/mt. It initially moved higher, peaking at 76,990 yuan/mt, then fluctuated downward to a low of 76,630 yuan/mt during the session. By the end of trading, the center rose again, closing at 76,840 yuan/mt, down 0.22%. Trading volume reached 26,000 lots, and open interest stood at 160,000 lots. Macro side, the US Commerce Secretary stated that on March 4, tariffs would be imposed on Canada and Mexico, with tariff levels to be determined by Trump. Additionally, reciprocal tariffs would be implemented in April. Last Friday evening, the US dollar index closed higher, as market concerns over US tariffs and trade wars weighed on global economic trade, putting pressure on copper prices. Fundamentally, post-holiday consumption has gradually improved, but the overall recovery pace remains slow. Entering early March, if copper prices undergo a significant pullback, consumption may see further release. In summary, with the US dollar index pulling back and destocking in some regions, copper prices are expected to find some support today.

Aluminum

Futures: Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,615 yuan/mt, hitting a high of 20,630 yuan/mt and a low of 20,520 yuan/mt, before closing at 20,545 yuan/mt, down 75 yuan/mt or 0.36%. On Friday, LME aluminum opened at $2,632.5/mt, reached a high of $2,641/mt and a low of $2,600/mt, and closed at $2,604/mt, down $27/mt or 1.03%.

Summary: On the macro front, last Friday night, US inflation data met expectations, and the US Fed adopted a cautious stance on interest rate cuts, pushing the US dollar index to a nearly two-week high, which pressured base metals. Domestically, the "Government Work Report" proposed implementing accommodative macro policies to expand domestic demand, providing confidence support to the market. On the fundamentals side, cost support has shown signs of stabilization. Coupled with the steady recovery of downstream operating rates ahead of the traditional "golden March and silver April" peak season, attention should be focused on the sustained realization of March end-use consumption demand. As the traditional consumption peak season approaches, inventory turning points are becoming more imminent. Combined with policy guidance, supply-side pressure is expected to ease. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum remains more likely to rise than fall. The possibility of further developments in tariff-related issues and macroeconomic stimulus leading to unexpected demand cannot be ruled out. Aluminum prices are expected to fluctuate upward at high levels.

Lead

Last Friday, LME lead opened at $2,003.5/mt. During the Asian trading session, the market saw sluggish trading, and LME lead's trading center slightly shifted downward, dragged by the weak SHFE lead. However, it mostly hovered in a consolidation pattern. Entering the European session, LME lead rebounded, but as expectations for an escalation in the trade war intensified, base metals generally declined. LME lead also experienced consecutive drops during the night session, eventually closing at $1,987/mt, down by 1.05%.

Last Friday, the most-traded SHFE lead 2504 contract opened at 17,190 yuan/mt. In the early session, SHFE lead surged strongly, reaching a high of 17,280 yuan/mt. Although it briefly pulled back to around 17,200 yuan/mt due to the decline in LME lead, it maintained a high-level fluctuation in the latter half of the session. SHFE lead eventually closed at 17,240 yuan/mt, up by 0.29%. Its open interest reached 48,467 lots, an increase of 615 lots compared to the previous trading day. In terms of the lead fundamentals, unexpected maintenance at some delivery brand enterprises led to a decline in smelters' in-plant inventory, while social warehouses reached a three-month high, limiting the upward space for lead prices.

Entering March, the impact of the Chinese New Year holiday has dissipated, and the overall supply and demand in the lead market are expected to increase. From the weekly marginal changes, the supply side is expected to see a slight increase, while the demand side is likely to remain stable. The visible inventory of lead ingots still has room for accumulation. On the other hand, raw material supply remains tight, and due to expectations for production increases on the supply side, prices of raw materials such as scrap remain relatively firm. The stalemate between bullish and bearish factors is unlikely to be broken in the short term.

Zinc

Last Friday, LME zinc opened at $2,807/mt. At the beginning of the session, bulls reduced positions, and LME zinc trended downward, hitting a low of $2,772/mt during European trading hours. Subsequently, bears took profits and exited, leading LME zinc to fluctuate upward, peaking at $2,814.5/mt during the night session. Later, the center gradually pulled back to near the daily moving average, closing down at $2,798/mt, a decrease of $11.5/mt or 0.41%. Trading volume increased to 11,290 lots, while open interest decreased by 3,902 lots to 226,000 lots. Last Friday, LME zinc recorded a long lower-shadow bearish candlestick. Trump's upcoming tariff policy has raised concerns about its impact on the global economy, weighing on the performance of base metals. Meanwhile, inflation data met expectations, and the strengthening U.S. dollar continued to pressure base metals. However, LME zinc is expected to fluctuate in the short term.

Last Friday, the most-traded SHFE zinc 2504 contract opened at 23,495 yuan/mt. At the beginning of the session, shorts reduced positions, and SHFE zinc quickly surged, peaking at 23,640 yuan/mt. Subsequently, bulls reduced positions, and SHFE zinc fluctuated downward to below the daily moving average, consolidating around 23,510 yuan/mt. It eventually closed higher at 23,510 yuan/mt, up 85 yuan/mt or 0.36%. Trading volume decreased to 70,890 lots, while open interest fell by 3,676 lots to 93,231 lots. Last Friday, SHFE zinc recorded a small bullish candlestick with a long upper shadow, with resistance formed by the 10-day and 20-day moving averages above. Macro sentiment weakened, geopolitical impacts persisted, zinc concentrate TC continued to rise, and supply expectations remained relatively loose. Meanwhile, downstream consumption is still recovering. Zinc prices are expected to fluctuate downward in the short term.

Tin

With the Two Sessions approaching, the market is focusing on the potential release of domestic policy benefits, which may strengthen tin prices. On the international front, close attention should be paid to the impact of US tariff policies on tin and other non-ferrous metals, as well as the US PCE data to be released on Friday, which will provide guidance on the US Fed's interest rate path. Market volatility is expected to increase ahead of the Fed's rate meeting. The US dollar index pulled back to around 107 after weak January retail sales data, providing short-term support for the non-ferrous metals sector. However, Fed governors emphasized the need for more evidence of declining inflation before cutting interest rates, dampening risk appetite.

From the perspective of the domestic tin ore market, the overall trend shows strong futures and relatively weak spot performance. Supply side, the anticipated resumption of Myanmar tin ore production has not yet materialized. Wa State is considering restarting mining, but no specific timetable has been set, leading to bearish market sentiment. Domestic tin ore supply remains relatively stable, but inventory pressure is significant. SHFE tin inventory has increased, while LME tin inventory has fallen to a one-year low. Demand side, growth in demand from the electronics and new energy sectors supports tin prices, but traditional consumption sectors remain weak. Downstream enterprises are resuming operations at a slow pace, market trading activity is low, and social inventory buildup is evident. Spot transactions are sluggish, with most downstream enterprises restocking during price pullbacks, resulting in limited overall trading volume.

In summary, SHFE tin prices are expected to hover at highs in the short term, with a trading range of 252,000–258,000 yuan/mt. Tight supply conditions and potential growth in new energy demand will continue to support tin prices, but macro policy uncertainties 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 also be paid to statements from relevant representatives. The US dollar index is under pressure and declining, boosting SHFE tin prices denominated in yuan. Meanwhile, the strong performance of gold and other precious metals also provides linked support to the non-ferrous sector. From a technical perspective, the short-term resistance level for the most-traded SHFE tin contract has moved up to around 268,000 yuan/mt, with support at 255,000 yuan/mt. In the coming period, SHFE tin prices may hover at highs, with a mix of bullish and bearish factors. Bullish factors include a weaker US dollar, expectations of overseas destocking, tight domestic supply, and policy-driven demand stimulation. Bearish risks include slower-than-expected downstream resumption progress, expanded spot discounts suppressing purchase willingness, and selling pressure triggered by high prices.

Nickel

Last week, nickel prices exhibited a fluctuating trend, with refined nickel prices experiencing significant intra-week volatility. The mainstream spot premiums for Jinchuan No. 1 nickel ranged from 1,500-2,000 yuan/mt, with average premiums fluctuating between 1,600-1,950 yuan/mt. On February 28, after the contract switched to 2504, nickel prices initially declined in the morning but later rebounded, closing at 126,864 yuan/mt, up 1.50% from the previous trading day. On the macro front, with the upcoming Two Sessions in China, the market generally anticipates the introduction of favorable policies. However, the global economic environment remains weak, downstream stainless steel and battery demand growth is sluggish, and the surplus in nickel inventory has tilted the supply-demand balance towards a supply surplus, which is unfavorable for nickel price increases. On the fundamentals, Indonesia has approved 207 RKABs, and mine shipments are proceeding normally. Domestic trade ore supply is relatively ample, but as downstream smelters deplete their inventories, concentrated stockpiling is expected after the Chinese New Year. The FOB prices of medium- to high-grade nickel ore in the Philippines have continued to rise post-holiday, driven by reduced supply due to the rainy season and stronger sentiment to stand firm on quotes from mines. Nickel ore prices are likely to fluctuate upward in the future. For the coming week, SHFE nickel prices may continue to be constrained by supply-demand dynamics and policy uncertainties. Market sentiment awaits favorable news or policy-driven demand stimulation from the Two Sessions.