SMM Morning Comment For SHFE Base Metals (Mar 5)

SHANGHAI, Mar 5 (SMM) –

Copper

Overnight, LME copper opened at $9,355/mt, initially rising to a high of $9,416/mt during the session. It then fluctuated downward, hitting a low of $9,335/mt near the close, before the center lifted, ultimately closing at $9,387/mt, down 0.14%. Trading volume reached 18,000 lots, and open interest stood at 298,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 76,980 yuan/mt, initially fluctuating to a high of 77,090 yuan/mt. It then fluctuated downward, hitting a low of 76,660 yuan/mt near the close, followed by sideways movement, and finally closed at 76,750 yuan/mt, down 0.52%. Trading volume reached 29,000 lots, and open interest stood at 163,000 lots. Macro side, Trump stated that Canada’s retaliatory tariffs on the US would immediately trigger equivalent counter-tariffs from the US. The EU strongly condemned the US tariffs on Canada and Mexico, while the Commerce Secretary suggested that Trump might compromise on tariffs with Canada and Mexico, potentially announcing exemptions today. Canada and Mexico have already announced countermeasures, and China has also imposed additional tariffs on US agricultural products. Concerns over tariffs and global trade resurfaced, but at the same time, the US dollar index continued to decline. Copper prices fluctuated rangebound with the center moving lower. Fundamentally, imported supplies have gradually decreased, and non-registered sources were highly favored. Copper prices fluctuated at highs, while downstream consumption recovery remained limited. In summary, with uncertainties surrounding tariffs and trade prospects, and the US dollar index continuing to fall below the 106 mark, copper prices are expected to fluctuate at highs today, with no significant decline anticipated.

Aluminum

Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,670 yuan/mt, with a high of 20,675 yuan/mt and a low of 20,560 yuan/mt, closing at 20,575 yuan/mt, down 100 yuan/mt or 0.48%. Yesterday, LME aluminum opened at $2,613/mt, with a high of $2,626/mt and a low of $2,597.5/mt, closing at $2,622.5/mt, up $11.5/mt or 0.44%.

Summary: On the macro side, Canada and Mexico have begun retaliating against Trump's tariff hikes, but the tariff policy remains "unpredictable," with market risk aversion sentiment still spreading. The US dollar index is under pressure near the 105 level. Domestically, the issuance of 2 trillion yuan replacement bonds has started, and the Two Sessions are about to convene, with market focus on policy implementation expectations. Fundamentals side, cost support shows signs of stabilizing, coupled with a steady recovery in downstream operating rates ahead of the traditional "golden March and silver April" peak season. Attention should be paid to the sustainability of March end-use consumption demand. On the inventory side, domestic aluminum ingot and billet inventories increased by only 6,500 mt this Monday, indicating a slowdown in inventory buildup, with a turning point in inventory approaching. Supply side pressure is expected to gradually ease. SMM believes that driven by macro sentiment and trading expectations, SHFE aluminum remains more likely to rise than fall. However, concerns over intensified overseas trade frictions warrant close attention to policy expectations during the Two Sessions. In the short term, aluminum prices are expected to fluctuate upward at high levels.

Lead

Overnight, LME lead opened at $1,993/mt. During the Asian trading session, the market saw sluggish trading, with LME lead fluctuating between $1,985-2,000/mt. Entering the European session, LME lead inventory continued to decline, coupled with the US dollar index dropping to a three-month low, leading to a general strengthening of base metals. LME lead reached a high of $2,014.5/mt and eventually closed at $2,012.5/mt, up 0.9%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,290 yuan/mt. Driven by the rise in LME lead, SHFE lead surged strongly at the beginning of the session, breaking through the 17,300 yuan/mt resistance level and reaching a high of 17,330 yuan/mt, the highest level this year. However, with increased domestic market supply and lingering inventory buildup risks, SHFE lead pulled back after the surge and finally closed at 17,240 yuan/mt, up 0.12%. Its open interest stood at 45,680 lots, down 675 lots from the previous trading day.

Recently, lead ingot inventory trends in domestic and overseas markets have diverged, while lead prices have shown an upward fluctuation trend. In March, with the impact of the Chinese New Year fading, lead ingot supply and demand are both expected to increase, and market trading activity is likely to improve compared to February. On the supply side, concentrated increases are mainly driven by the resumption of production at primary and secondary lead smelters, as well as the commissioning of new capacity. Notably, the concentrated release of new secondary lead capacity has led to a short-term surge in demand for raw materials such as scrap batteries. However, the subsequent marginal increase in lead ingot supply raises the risk of inventory buildup. Additionally, the domestic subsidies for e-bike and automobile trade-in programs have been intensified, and attention should be paid to the extent to which these programs offset the traditional off-season demand.

Zinc

Overnight, LME zinc opened at $2,836/mt. In the early session, LME zinc fluctuated along the daily average line. During European trading hours, bears entered the market, driving LME zinc down sharply to a low of $2,807/mt. Later, as bears took profits and exited, LME zinc rebounded during the night session, reaching a high of $2,845.5/mt. However, the 5-day moving average formed resistance, and the center of LME zinc gradually pulled back, fluctuating near $2,816/mt before closing down at $2,836/mt, a decrease of $18.5/mt or 0.65%. Trading volume decreased to 9,682 lots, while open interest increased by 2,666 lots to 226,000 lots. Overnight, LME zinc recorded a long bearish candlestick. The slowdown in US economic data growth and Canada's retaliatory tariffs on the US, which would immediately trigger equivalent reciprocal tariffs, led to concerns over a new round of trade conflicts, suppressing the performance of base metals. The center of LME zinc shifted downward and is expected to continue fluctuating.

Overnight, the most-traded SHFE zinc 2504 contract opened at 23,730 yuan/mt. In the early session, SHFE zinc briefly climbed, reaching a high of 23,795 yuan/mt. Subsequently, as shorts increased their positions, SHFE zinc fell below the daily average line, hitting a low of 23,570 yuan/mt near the session's end. It ultimately closed down at 23,615 yuan/mt, a decrease of 65 yuan/mt or 0.27%. Trading volume decreased to 50,968 lots, while open interest decreased by 1,027 lots to 85,200 lots. Overnight, SHFE zinc recorded a bearish candlestick. The 5-day moving average provided support below, while the 10-day and 20-day moving averages formed resistance above. Macro sentiment remained bearish, with concerns over a new round of tariffs fueling fears of trade conflicts. From a fundamental perspective, there are no significant imbalances in supply and demand, and zinc prices are expected to primarily fluctuate and consolidate.

Tin

US Commerce Secretary Lutnick stated on Tuesday that the Trump administration might announce a tariff reduction pathway for goods from Mexico and Canada as early as tomorrow. In an interview with Fox, Lutnick said, "Mexican and Canadian officials have been calling me all day today, trying to show they can do better, and the President is listening. So, I think he will reach some agreements with them. It won't be something like suspending tariffs, but I believe Trump will make some compromises with them in certain areas, and we are very likely to announce this tomorrow." Lutnick mentioned that the tariffs might be set at "some middle level," with Trump making some concessions to Canada and Mexico but not fully yielding. He dismissed the idea of a complete tariff removal, referencing the US-Mexico-Canada Agreement negotiated during Trump's first presidential term. "If you comply with those rules, then the President will consider reducing some tariffs," he said. "If you don't comply with those rules, then you have to pay the tariffs." This marks the first public indication since the tariffs were implemented that Trump might waver on this issue. What puzzled the market was that Trump had previously stated that Canada's retaliatory tariffs on the US would immediately trigger "an equivalent amount of reciprocal tariffs" from the US. In the tin ingot spot market, transactions were relatively active yesterday. Some downstream enterprises began restocking, while a few still believed there was downside room in current prices. These enterprises purchased through a post-pricing model, settling the final payment after prices dropped. Some traders reported transactions of around 10-30 mt yesterday, while a few mentioned deals of 1-2 truckloads. Overall, selling sentiment showed signs of recovery, indicating a partial rebound in market confidence.