SMM Morning Comment For SHFE Base Metals (Mar 6)

SHANGHAI, Mar 6 (SMM) –

Copper

Overnight, LME copper opened at $9,559.5/mt, initially bottomed out at $9,508/mt during fluctuations, then its center moved higher, peaking at $9,594.5/mt by the end of the session, and finally closed at $9,594/mt, up by 2.21%. Trading volume reached 33,000 lots, and open interest stood at 295,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,980 yuan/mt, immediately peaked at 77,990 yuan/mt, and then fluctuated rangebound throughout the session, bottoming out at 77,640 yuan/mt in early trading and finally closing at 77,900 yuan/mt, up by 1.02%. Trading volume reached 39,000 lots, and open interest stood at 166,000 lots. Macro side, Trump once again delayed certain tariffs, intensifying concerns over inflation and the economy caused by tariffs. The US dollar index continued to decline, hitting a nearly four-month low and falling below the 105 mark, which supported copper prices. Meanwhile, the Two Sessions convened domestically, with stabilizing the real estate and stock markets being written into the general requirements of the government work report for the first time. Coupled with other favorable news, copper prices were significantly boosted. Fundamentally, the price spread between futures contracts narrowed, while import arrivals decreased, and the tight supply expectations in domestic trade increased, boosting premiums. However, downstream transactions showed no significant improvement. Overall, with frequent positive news during the Two Sessions and the US dollar index operating at low levels, copper prices are expected to remain relatively firm today.

Aluminum

Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,680 yuan/mt, reached a high of 20,705 yuan/mt, a low of 20,590 yuan/mt, and closed at 20,705 yuan/mt, up 100 yuan/mt or 0.49%. Yesterday, LME aluminum opened at $2,620/mt, hit a high of $2,670/mt, a low of $2,609.5/mt, and closed at $2,667/mt, up $50.5/mt or 1.93%.

Summary: Macro side, Trump announced a delay in some auto tariffs, but due to the uncertainty of tariffs, the market is concerned about their impact on inflation and the economy. The US dollar index fell below the 105 mark, hitting a low of 104.33, the lowest in nearly four months, releasing upward momentum for base metals. Domestically, during the Two Sessions, favorable news emerged, including measures to boost domestic demand and stabilize housing prices, with policies leaning towards easing. Fundamentals side, cost support showed signs of stabilization, coupled with a steady rebound in downstream operating rates ahead of the traditional peak season of "Golden March and Silver April." Special attention should be paid to the sustained realization of end-use consumption demand in March. Inventory side, domestic aluminum ingot inventory achieved mid-week destocking of 15,000 mt today, and an inventory turning point may gradually form, potentially easing supply-side pressure. 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 persist. Focus should be placed on the implementation of Two Sessions policies. In the short term, aluminum prices are expected to fluctuate upward at high levels.

Lead

Overnight, LME lead opened at $2,009/mt and fluctuated upward throughout the day, with its overall center moving higher. Particularly during the European session, the decline in LME lead inventory expanded, coupled with the US dollar index dropping to a four-month low, which strengthened base metals across the board. LME lead reached a three-month high of $2,035/mt and eventually closed at $2,030/mt, up by 0.87%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,350 yuan/mt. With an inventory buildup in SHFE lead warehouse warrants and the commissioning of new capacity on the domestic supply side, SHFE lead initially reversed its daytime strength. Later, driven by the rise in LME lead, SHFE lead strengthened again but failed to break through the daytime high. It finally closed at 17,410 yuan/mt, up by 0.49%, with open interest at 49,996 lots, a decrease of 675 lots compared to the previous trading day.

Recently, supported by domestic macro policy expectations, base metals have generally strengthened. In contrast, in the lead market fundamentals, the divergence in domestic and overseas lead ingot inventories remains unchanged. Meanwhile, the commissioning of new secondary lead capacity in China continues to advance. With rising lead prices, lead smelters have increased production enthusiasm in the short term, driving up demand for raw materials such as scrap batteries. Moving forward, attention should be paid to the marginal increase in lead ingot supply and the rising risk of inventory buildup. Additionally, in 2025, China will allocate ultra-long-term special treasury bonds to support trade-in subsidies for consumer goods such as e-bikes and automobiles, with increased subsidy intensity. The extent to which this trade-in demand offsets the traditional off-season needs to be closely monitored.

Zinc

Overnight, LME zinc opened at $2,820/mt. In early trading, LME zinc fluctuated downward along the daily average line, dipping to a low of $2,809/mt. During European trading hours, bears exited to avoid risks, and LME zinc fluctuated upward, closing at the intraday high of $2,886/mt, up $66.5/mt or 2.36%. Trading volume increased to 12,937 lots, while open interest decreased by 3,843 lots to 222,000 lots. Overnight, LME zinc recorded a long bullish candlestick. Concerns over the impact of tariffs on inflation and the economy led investors to start pricing in the possibility of a full-scale economic contraction in the US. Additionally, Trump's delay of some auto tariffs and the decline in the US dollar index boosted base metals broadly, with LME zinc expected to continue fluctuating at high levels.

Overnight, the most-traded SHFE zinc 2504 contract opened at 23,800 yuan/mt. In early trading, SHFE zinc briefly moved downward, hitting a low of 23,690 yuan/mt. Subsequently, bulls increased their positions, driving SHFE zinc upward past the daily average line, reaching a high of 23,870 yuan/mt near the session's end, and finally closing at 23,865 yuan/mt, up 220 yuan/mt or 0.93%. Trading volume decreased to 69,560 lots, while open interest increased by 2,786 lots to 88,213 lots. Overnight, SHFE zinc recorded a long bullish candlestick. Improved macro sentiment, the inclusion of the directive to "stabilize the real estate and stock markets" in the general requirements of the Government Work Report for the first time, and positive expectations from the Two Sessions provided some support. Coupled with the boost from the overseas market, SHFE zinc's center shifted upward, and zinc prices are expected to primarily fluctuate within a range.

Tin

US Senate Democratic Leader Chuck Schumer predicted on Wednesday that former President Trump's efforts to repeal subsidies for semiconductor factories would ultimately fail. Schumer stated that the CHIPS and Science Act, which he helped negotiate, is "crucial for the US to lead the world in technology and artificial intelligence, as well as to bring high-paying manufacturing jobs back to the US." This $52 billion subsidy program has received bipartisan support, spurring investments exceeding $400 billion from companies like TSMC and Intel. However, during Tuesday night's joint session of Congress, Trump called for the repeal of the act, earning applause from congressional Republicans. While Republicans control both the House and Senate, the slim majority in the House, coupled with expected filibustering in the Senate, makes repealing the act politically challenging. In the tin ingot spot market, transactions were relatively sluggish yesterday. Most downstream enterprises reported that recent orders have been mediocre, with overall restocking demand remaining low. Some downstream companies completed restocking last weekend, and others made purchases earlier this week. Currently, most downstream enterprises show low purchasing willingness and are largely adopting a wait-and-see approach. Some traders reported scattered transactions yesterday, with a few indicating sales of around one truckload. Overall, market activity was weak, and participants are awaiting further updates on the resumption of production in the Wa State region of Myanmar.