Focus on Whether Profit-Taking Occurs at Key Copper Prices Levels [Institutional Commentary]

【Copper】

On Friday, SHFE copper reduced positions and fell below the 5-day moving average. Technically, attention is on the performance of US copper futures at record levels, as a pullback may be triggered by profit-taking in the US market. In addition to monitoring refined ore supply, attention should also be paid to demand strength. SMM social inventory decreased by 2,600 mt to 346,400 mt within the week. High prices affected destocking speed, but the trend of destocking is expected to continue. Short-term copper prices are adjusting, with support expected around 79,500-80,000 yuan/mt.

【Aluminum and Alumina】

Today, SHFE aluminum dropped back slightly, with spot discounts remaining. This year's inventory buildup for aluminum ingot and billet is similar to last year, with the turning point for aluminum ingot slightly earlier. The past week saw a strong destocking of 28,000 mt, and the market expects robust consumption during the peak season, with attention on the pace of destocking. In the short term, SHFE aluminum continues to oscillate above 205,000 yuan/mt, testing the resistance level at 210,000 yuan/mt. Domestic alumina spot transactions fell to around 3,100 yuan/mt, while overseas transactions dropped below 400 US dollars. With operating capacity at a historical high, the supply-demand balance remains loose, and falling ore prices have lowered the cost center. Alumina prices will remain under pressure until significant production cuts occur.

【Zinc】

Zinc prices pulled back, with downstream buyers restocking at lower levels, improving spot trades. SMM zinc social inventory decreased by 4,900 mt to 131,000 mt MoM. Overseas destocking and domestic inventory buildup not meeting expectations can be seen as the final manifestation of tight mine supply in 2024, providing insufficient impetus for higher zinc prices. During the traditional peak season, downstream rigid demand supports prices. The EU's 80 billion euro defense financing plan to reduce dependence on the US has somewhat boosted consumer confidence, but internal divisions cast doubt on its actual implementation. After March, domestic smelters turned profitable, and expectations for increased zinc ingot production strengthened. In Q2, additional mine supply will be released, and news of US reviews of global key shipping lanes adds further uncertainty to exports. Real estate remains a drag on consumption, and policy support for infrastructure is limited, with mixed performance in manufacturing. Zinc should still be treated with a bearish bias.

【Lead】

Overseas inventories continued to build up, with SMM lead social inventory rising to 74,000 mt. Imported crude lead was used as raw material, and lead concentrate imports increased significantly YoY, leading to a decline in both overseas and domestic markets. The spread between futures and spot prices remained at a high of 255 yuan/mt. Previously, secondary lead smelters raised prices to acquire raw materials, maintaining a price difference of 75 yuan/mt between primary metal and scrap. Cost side support still exists, with consumption still in the off-season. The floor is temporarily set at 17,000 yuan/mt, and the price difference between primary metal and scrap is likely to narrow further, with local inversion considered a bottoming signal.

【Nickel and Stainless Steel】

SHFE nickel fluctuated downward, with active market trading. Supply disruptions related to Indonesia were concentrated, mainly affecting sentiment on the raw material side, and led to higher high-grade NPI prices and NPI destocking, offsetting the long-term surplus-driven bearish trend. Jinchuan premiums fell to 1,400 yuan, Russian nickel discounts stood at 100 yuan, and electrodeposited nickel discounts were 100 yuan. High-grade NPI prices strengthened significantly, with Indonesian ore still influencing raw material pricing, with the latest quote at 1,015 yuan/mtu. Inventory-wise, NPI inventory fell by 6,000 mt to 23,000 mt, refined nickel inventory increased by 4,500 mt to 49,000 mt, and stainless steel inventory rose by nearly 10,000 mt to 959,000 mt. Technically, SHFE nickel met resistance near 135,000 yuan/mt, with attention on whether a rebound top structure forms.

【Tin】

SHFE tin expanded its adjustment range, with temporary support at 275,000 yuan/mt, expected to attract some buying interest. Today, spot tin was quoted at 281,200 yuan/mt, awaiting today's social inventory changes. In the first two months, China's tin concentrate and tin ingot imports declined significantly, and it became a net exporter of tin ingots. Short-term tin price support is expected at 275,000 yuan/mt, and while monitoring supply risks, it is recommended to increase demand tracking.