SMM Morning Comment For SHFE Base Metals (Mar 25)

SHANGHAI, Mar 25 (SMM) –

Copper

LME copper opened at 10,030.5 yuan/mt overnight, reaching a high of 10,044.5 yuan/mt and a low of 9,930 yuan/mt, closing at 9,934.5 yuan/mt. The overall trend fluctuated upward before pulling back after hitting the high. The increase was 0.84%, with a trading volume of 15,000 lots and open interest of 298,000 lots. The most-traded SHFE copper 2505 contract opened at 82,010 yuan/mt, reached a high of 82,110 yuan/mt, and a low of 81,460 yuan/mt, closing at 81,490 yuan/mt. The overall trend showed a fluctuating downward pattern. The increase was 0.65%, with a trading volume of 51,000 lots and open interest of 244,000 lots.

Fundamentally, from the supply side, national social inventory continued to decline over the weekend. As of Monday, March 24, SMM's mainstream region copper inventories decreased by 12,800 mt to 333,600 mt compared to the previous Thursday, and by 15,400 mt compared to the previous Monday. The current inventory level has raised concerns about Q2 supply. From the demand side, downstream buyers are maintaining just-in-time procurement, but buying interest is gradually warming up, showing some positive changes. In terms of prices, the macro and fundamental factors are resonating, and copper prices are expected to have further room for increase today.

Aluminum

Futures: The most-traded SHFE aluminum 2505 contract opened at 20,750 yuan/mt, reached a high of 20,750 yuan/mt, a low of 20,625 yuan/mt, and closed at 20,640 yuan/mt, down 60 yuan/mt, or 0.29%. LME aluminum opened at $2,622.5/mt, hit a high of $2,645/mt, a low of $2,605/mt, and closed at $2,614.5/mt, down $10/mt, or 0.38%.

Summary: From a macro perspective, on Monday, the US dollar index returned to the 104 level, closing up 0.16% at 104.31, as data showed a rebound in US business activity in March. SHFE aluminum night session continued to adjust. US Fed Bostic's hawkish comments and overall bearish PMI data somewhat dampened external market sentiment. Domestically, the positive macro front remains unchanged. Finance Minister Lan Fuan stated that fiscal policy in 2025 will be more proactive, with continuous and stronger efforts. The first-quarter PBOC meeting suggested increasing the intensity of monetary policy regulation, with potential RRR cuts and interest rate cuts. The finance minister's positive signals, along with substantial fiscal support for consumption, such as raising pensions and providing child-rearing subsidies, aim to boost consumption. Fundamentally, the aluminum industry chain is still bullish. The seasonal destocking trend of "Golden March, Silver April" is further confirmed, and end-use consumption, such as NEVs, is steadily growing. The import window remains closed, and net imports of primary aluminum in January-February 2025 YoY significantly decreased. Currently, aluminum prices maintain an LME outperforms SHFE pattern. The domestic import window is closed, and import losses hover around 2,600 yuan/mt, reducing overseas suppliers' willingness to clear customs and ship to China. SMM expects that in March, domestic primary aluminum imports will mainly be based on long-term contracts, with no significant increase in net imports. SMM believes that continued destocking over the weekend and domestic policy support will underpin short-term prices. If expectations for US Fed interest rate cuts rise or if trade relations between the US and Europe improve, aluminum prices may continue to fluctuate upward. However, whether SHFE aluminum can return to the 21,000 yuan/mt level still requires further upward momentum. Close attention should be paid to changes in macro sentiment and the actual release of downstream demand.

Lead

Futures Market: Overnight, LME lead opened at $2,028.5/mt. Driven by the rise in SHFE lead, LME lead fluctuated upward during the Asian trading session, gradually recovering the losses from the previous day. However, as the US dollar index rose during the European trading session, LME lead came under pressure and turned to a decline, giving up some of its gains. LME lead finally closed at $2,036/mt, with a 0.44% increase. Overnight, news about environmental protection and maintenance on the supply side continued to ferment. The most-traded SHFE lead 2505 contract opened at 17,640 yuan/mt. With imported lead flowing into the domestic market, partially offsetting the supply, SHFE lead showed a pattern of moving downwards after a higher opening. In the latter part of the trading session, SHFE lead mainly fluctuated between 17,495-17,525 yuan/mt, eventually closing at 17,495 yuan/mt, with a 0.48% decrease. Its open interest reached 64,443 lots, a reduction of 2,154 lots from the previous trading day.

Lead Price Forecast: Recently, lead smelters in Henan entered maintenance, and with other planned maintenance, it is expected that primary lead supply will decrease MoM in April. Some smelters in Hunan have cut production due to raw material shortages, and there are water pollution incidents, with environmental inspections extending to Guangxi and Guangdong, though they have not yet had a significant impact on production. At the same time, lead prices have fallen sharply, and smelting profits have shrunk, especially with scrap battery prices remaining high. Secondary lead enterprises' profit margins are approaching the cost line, and some key production areas have seen minor production cuts. Additionally, imported lead has flowed into the domestic market, partially filling the raw material supply gap. As the regional price difference for secondary refined lead expands, the short-term lead market will continue to revolve around supply changes and recycling costs.

Zinc

Overnight, LME zinc opened at $2,932/mt. At the beginning of the session, the center of LME zinc fluctuated around the daily average. During European trading hours, LME zinc rose to a high of $2,976/mt. Subsequently, longs reduced their positions, causing LME zinc to plunge during the night session. Attempts to rise were met with resistance at the daily average, ultimately leading to a pullback. It closed at $2,938.5/mt, up $11/mt, or 0.38%. Trading volume decreased to 64,114 lots, and open interest fell by 451 lots to 224,000 lots. On March 24, LME zinc inventory decreased by 750 mt to 153,650 mt, a decline of 0.49%. Overnight, LME zinc recorded a bullish candlestick with no lower shadow. The lower Bollinger Band provided resistance, while the 20- and 60-day moving averages offered support. The US S&P Global Composite PMI for March exceeded expectations, and the US dollar index's rise put pressure on LME zinc, leading to a pullback.

Overnight, the most-traded SHFE zinc 2505 contract opened at 24,270 yuan/mt. After opening, SHFE zinc quickly rose to 24,280 yuan/mt. Subsequently, longs reduced their positions, causing SHFE zinc to fall below the daily average to a low of 24,080 yuan/mt. Then, bulls and bears engaged in a tug-of-war, with the center of SHFE zinc fluctuating around 24,110 yuan/mt. It closed at 24,110 yuan/mt, down 90 yuan/mt, or 0.37%. Trading volume decreased to 64,465 lots, and open interest fell by 2,179 lots to 131,000 lots. Overnight, SHFE zinc recorded a bearish candlestick. The upper Bollinger Band provided resistance, while various moving averages offered support. Although domestic social inventory slightly decreased, SHFE zinc also weakened slightly under external influence. The Ministry of Finance recently stated that fiscal policy will be more proactive in 2025, which is expected to provide some support to zinc prices.

Tin

A recent draft document from the Central Economic Planning Committee of Wa State clearly states that the Manxiang mining area can proceed with orderly resumption of production and operations after completing relevant procedures as stipulated in [Document No. 2023-08 of Wa Economy]. According to the draft, the Manxiang mining area will be divided into a mining zone and an exploration zone. The mining zone includes existing mines, open-pit areas, and beneficiation plants, while the exploration zone is open to large enterprises for integrated exploration, followed by formal design and exploitation. The document encourages various forms of joint operations, the introduction of new technologies, and comprehensive utilisation of low-grade ore. The Central Economic Committee stressed that all surface tailings belong to the government. In principle, no new mines or open-pit areas will be approved in the existing Manxiang mining area. Additionally, companies conducting mining and exploration must first apply for new permits under the new licensing system announced in February. It is currently unclear how long this process will take. Affected by this draft, SHFE tin prices in the night session opened and closed lower, with overall market sentiment being bearish. However, given that the official resumption document has not yet been released, the decline was limited. The price center fell to around 274,000 yuan/mt. In the spot tin ingot market, trading conditions improved yesterday, with most traders reporting that SHFE tin prices were at a relatively low level over the past few weeks, and some downstream and end-user enterprises showed increased willingness to restock.

Nickel

Spot premiums and discounts: The mainstream spot premium quotation range for Jinchuan No.1 nickel was 1,900-2,200 yuan/mt, with an average premium of 2,050 yuan/mt, up 100 yuan/mt from the previous trading day. The premiums and discounts for Russian nickel ranged from -150 to 100 yuan/mt, with an average discount of -25 yuan/mt, up 25 yuan/mt. Futures: Yesterday, nickel prices fluctuated considerably after the opening. As of 11:30, the closing price was 129,740 yuan/mt, down 0.05% from the previous trading day's settlement price, with a low of 128,640 yuan/mt. In terms of spot premiums and discounts, the Jinchuan brand nickel rose 100 yuan/mt from the previous trading day. Traders chose to raise premiums appropriately to gauge market demand. From a technical perspective, SHFE nickel futures contracts fluctuated higher after the opening, mainly influenced by the frequent adjustments in Indonesia's nickel industry policies, which may push nickel prices upward.