SMM Morning Comment For SHFE Base Metals (Mar 28)

SHANGHAI, Mar 28 (SMM) –

Copper

Overnight, LME copper opened at $9,833/mt, reaching a high of $9,872/mt and a low of $9,808/mt, closing at $9,846.5/mt. The overall trend showed initial downward fluctuations followed by a rebound. The decline was 0.61%, with a trading volume of 26,000 lots and open interest of 311,000 lots. Overnight, the most-traded SHFE copper 2505 contract opened at 80,930 yuan/mt, reaching a high of 81,160 yuan/mt and a low of 80,550 yuan/mt, closing at 80,810 yuan/mt. The overall trend was downward fluctuations. The decline was 0.93%, with a trading volume of 84,000 lots and open interest of 223,000 lots. On the macro front, US data on Thursday showed a decline in initial jobless claims last week, but the market reaction was relatively small. The US dollar fluctuated on Thursday as the market speculated on the severity of the tariff measures to be announced by US President Trump next week, with uncertainty still unsettling the market. On the supply side, domestic social inventory destocking paused this week. Although east China maintained destocking, it was mainly due to reduced inflows. As of Thursday, March 27, SMM's mainstream copper inventory across the country slightly increased to 334,500 mt, marking the fourth consecutive week of weekly destocking. Next week, the arrival of imported copper and the increase in domestic copper production will both be limited, keeping the total supply at a low level. Demand side, affected by the recent high copper prices, downstream consumption has been weak, with sluggish market trading and declining spot premiums. Prices are expected to continue to fall tomorrow. Price-wise, with no macro positives and limited fundamental support, if domestic spot trading remains sluggish today, copper prices may continue to decline.

Aluminum

Futures: The most-traded SHFE aluminum 2505 contract opened at 20,710 yuan/mt overnight, hitting a high of 20,720 yuan/mt and a low of 20,570 yuan/mt, and closed at 20,610 yuan/mt, down 170 yuan/mt or 0.82%. LME aluminum opened at $2,605/mt yesterday, reaching a high of $2,620/mt and a low of $2,555/mt, and closed at $2,559/mt, down $46/mt or 1.77%.

Summary: Macro-wise, the US dollar index fell 0.37% as Trump's tariff policies brought uncertainty to the US economy. Despite faster-than-expected US Q4 growth, investors were more concerned about Trump's new auto tariffs, with risk-off sentiment dominating. SHFE aluminum pulled back under pressure in the night session. Domestic macro positives remained, with Finance Minister Lan Fo'an stating that 2025 fiscal policy will be more proactive and forceful; PBOC Deputy Governor Xuan Changneng reiterated the possibility of RRR and interest rate cuts based on conditions. Central fiscal measures to boost consumption, such as raising pensions and providing childcare subsidies, directly stimulated aluminum demand, especially in auto manufacturing and aftermarket sectors, significantly bullish for aluminum prices. Fundamentals-wise, the aluminum industry chain remained bullish, with the "golden March, silver April" seasonal destocking trend further confirmed, as aluminum ingot inventory approached the 800,000 mt mark after a mid-week sharp drop; NEV and other end-use consumption grew steadily, with downstream restocking demand also recovering. SMM believes that continued good destocking and domestic policy support will underpin short-term prices. If expectations for US Fed interest rate cuts rise or US-EU trade relations ease further, aluminum prices may continue to fluctuate upward in the short term, but the market remains somewhat suppressed by external bearish factors. Whether SHFE aluminum can return to the 21,000 yuan/mt level still requires further upward momentum. Continued close attention to macro sentiment changes and actual downstream demand release is needed.

Lead

Overnight, LME lead opened at $2,087.5/mt, hovering at highs during the Asian session and approaching the $2,100/mt level again. However, as the European session began, market concerns over the US imposing additional tariffs increased, and the US dollar index consolidated at highs. Longs gradually exited the market, leading to a step-by-step decline in LME lead, which erased the gains of the previous two days and finally closed at $2,040/mt, down 2.32%.

Overnight, dragged down by the decline in LME lead, the most-traded SHFE lead 2505 contract opened at 17,530 yuan/mt and traded below the 5-day and 10-day moving averages, consolidating near the 20-day moving average. The positive impact of tightening domestic supply was exhausted, and market concerns over the traditional consumption off-season weighed on SHFE lead, which saw its center of gravity shift downward, finally closing at 17,525 yuan/mt, down 0.54%. Its open interest fell to 52,546 lots, down 1,554 lots from the previous trading day.

Recently, the US imposed additional auto tariffs, indirectly affecting the consumption expectations of lead-acid batteries and dampening market trading sentiment. SHFE lead open interest has been decreasing daily. Currently, domestic and overseas lead ingot inventory trends diverge, and the domestic lead market is expected to see both supply and demand decline in April. However, new secondary lead capacity is still expected to come online, and the supply-side increase poses a risk of inventory buildup for lead ingots in the future.

Zinc

Overnight, the number of initial jobless claims in the US was lower than expected; the Premier of Ontario, Canada, stated that the US will grant full or partial tariff exemptions for Canadian automobiles; the EU plans to target US service exports, including large tech companies; the South Korean government will announce emergency measures for automakers in April; Brazilian President Lula announced that retaliatory tariffs will be imposed on US products; two departments stated that the offshore trade stamp duty preferential policy will continue; the Deputy Governor of the central bank mentioned that RRR cuts and interest rate cuts will be implemented based on domestic and overseas economic and financial conditions.

Overnight, LME zinc opened at $2,954.5/mt, initially fluctuating around the daily average line, reaching a high of $2,958.5/mt. During the European trading session, longs reduced positions, causing SHFE zinc to fluctuate downward below the daily average line, hitting a low of $2,893/mt, and finally closing at $2,898/mt, down $54/mt, a decrease of 1.83%. Trading volume increased to 86,561 lots, while open interest decreased by 622 lots to 225,000 lots. Overnight, LME zinc inventory decreased by 2,000 mt to 144,575 mt, a drop of 1.36%. LME zinc recorded a large bearish candle, with the upper Bollinger Band forming resistance and the 40/60-day moving averages providing support. The US initial jobless claims for the week were 224,000, lower than the expected 225,000, indicating resilience in the job market, leading to a decline in LME zinc.

Overnight, the most-traded SHFE zinc 2505 contract opened at 24,000 yuan/mt, initially dropping rapidly below the daily average line as longs reduced positions, hitting a low of 23,865 yuan/mt. Subsequently, a fierce battle between bulls and bears ensued, with SHFE zinc fluctuating around the daily average line, finally closing at 23,880 yuan/mt, down 255 yuan/mt, a decrease of 0.93%. Trading volume decreased to 81,087 lots, while open interest decreased by 7,916 lots to 111,000 lots. SHFE zinc recorded a bearish candle, with the 5-day moving average forming resistance and the 40-day moving average providing support. Driven by the LME, SHFE zinc declined. Meanwhile, SMM data showed an increase in domestic social inventory, weakening support for zinc prices. However, with the continuous recovery of end-use consumption and the expectation of increased domestic spot supply, SHFE zinc is expected to remain volatile in the short term.

Tin

Richmond Fed President Barkin recently stated that the US Fed continues to maintain a "moderately restrictive" monetary policy, a stance that appears particularly suitable in addressing the evolving economic environment and policy uncertainties. He noted that the US economy faces significant challenges, with policymakers operating in a low-visibility scenario where the wait-and-see sentiment among businesses and consumers is becoming increasingly pronounced, potentially dampening market confidence. Barkin likened the current economic situation to "a dense fog with zero visibility, requiring hazard lights to navigate," highlighting the complex challenge of formulating policies amidst uncertainty and rapid changes. His remarks touched on the potential inflationary impact of recent trade policies, with uncertain tariff levels and varied reactions further clouding the economic outlook. These shifts have led businesses to become more conservative in capital expenditures and hiring plans. In the night session, SHFE tin prices maintained a fluctuating trend, dipping slightly before rebounding to around 281,000 yuan/mt. In the tin ingot spot market, yesterday's trading remained sluggish, with most traders reporting only sporadic transactions, while a few managed to trade around one truckload. Downstream and end-user feedback indicated that current order volumes are relatively weak, down 10%-15% compared to the same period in previous years, with increasing procurement difficulties and thin profit margins on TCs.

Nickel

Spot premiums/discounts: The mainstream spot premium quotation range for Jinchuan No.1 nickel was 1,800-1,900 yuan/mt, with an average premium of 1,850 yuan/mt, up 50 yuan/mt from the previous trading day. The premium/discount quotation range for Russian nickel was -100 to 100 yuan/mt, at parity, unchanged from the previous trading day. Futures: Nickel prices fluctuated rangebound after opening today. As of 11:30, the closing price was 129,900 yuan/mt, up 0.11% from the previous trading day's settlement price, with a low of 129,600 yuan/mt. Recently, nickel prices have been fluctuating, and traders have appropriately raised premiums to protect profits while observing the recovery of market demand. Macro perspective: SHFE nickel futures contracts fluctuated slightly lower after opening in the morning, but nickel prices were supported by Indonesia's slower-than-expected mining progress and volume. Follow-up attention will be paid to the progress of tax policy releases.