The Implementation of Reciprocal Tariffs Led to a Broad Decline in Nonferrous Metals [Institutional Commentary]

【Copper】

On Thursday, the imposition of reciprocal tariffs pressured copper prices. Supported by peak season consumption, SHFE copper mostly fluctuated strongly around the 79,000 yuan level. Today, spot copper was at 79,150 yuan, with Shanghai copper premiums at 35 yuan. The price difference between primary metal and scrap narrowed to below 1,000 yuan, and social inventory continued to destock. While copper prices were volatile overseas, they remained stable domestically. The likelihood of copper prices surging to higher levels has significantly decreased. However, with the exemption of reciprocal tariffs on copper and domestic buying interest persisting, coupled with tight raw and secondary materials, copper is expected to fluctuate, with prices ranging between 77,500 and 81,000 yuan. Downstream buyers are mainly focusing on pricing during pullbacks.

【Aluminum & Alumina】

Today, the US's unexpected reciprocal tariff policy weighed on non-ferrous metals, with SHFE aluminum fluctuating downward. Spot premiums and discounts for aluminum showed limited fluctuations. Social inventories of aluminum ingots and billets decreased by 35,000 mt and 16,000 mt respectively compared to Monday, with recent destocking speeds being impressive. The market has expectations for the peak season. Under the drag of macro factors and the support of fundamentals, SHFE aluminum mainly fluctuated above the 20,000 yuan level, with support temporarily seen at the annual line of 20,300 yuan. Alumina operating capacity fluctuated at historically high levels, with expanded production cuts and maintenance failing to alter the long-term loose trend. New capacity will continue to release production, and domestic and overseas spot prices are expected to continue pulling back. Overseas ore prices have room to decline, and costs are likely to decrease. Alumina is unlikely to stop falling until larger-scale production cuts are triggered.

【Zinc】

On April 2, the US tariff policy was implemented, with shorts increasing positions and pressuring zinc prices. SHFE zinc broke support and fell, recording a 2.59% decline for the week. Some funds preferred to take profits before the holiday, with SHFE zinc's weighted open interest increasing by only 740 lots, and funds outflowing by 30.5 million yuan. The benchmark TC was finalized at $80/dmt, not exceeding market expectations and having limited impact on prices, significantly lower than the $165/dmt in 2024. With zinc prices falling, downstream buyers actively priced in, and SMM zinc social inventory decreased by 20,900 mt to 109,100 mt MoM. Cost side and downstream rigid demand still provide some support for zinc prices in the short term, with SHFE zinc expected to fluctuate between 23,000 and 23,500 yuan/mt. In Q2, incremental supply from the mine side will further materialize, with external demand under pressure. As the traditional peak season is more than halfway through, the medium-term bearish outlook for zinc remains unchanged, and selling on rallies is recommended.

【Lead】

Lead-acid battery companies have gradually started holidays, and the US tariff policy has been implemented, weakening consumption support for the futures market. Both domestic and overseas lead prices fell, with the SMM 1# lead average price reported at 16,975 yuan/mt, narrowing the discount to the near-month futures by 125 yuan/mt. The price difference between primary metal and scrap narrowed to 25 yuan/mt, with scrap battery prices remaining high and stable, and secondary lead smelters' losses expanding. In April, new secondary lead capacity continued to be released, but raw material supply remains the core constraint on secondary lead production. LME lead inventory is at a high of 230,000 mt, with spot import losses narrowing significantly. Overseas crude lead is expected to continue flowing into the domestic market, breaking cost-side support. SHFE lead is likely to break below the 17,000 yuan/mt support level.

【Nickel & Stainless Steel】

SHFE nickel fell sharply, with active market trading. Overnight, tariffs exceeded expectations, and market risk appetite dropped sharply. Jinchuan premiums were at 1,450 yuan, Russian nickel discounts at 50 yuan, and electrodeposited nickel discounts at 150 yuan. High-grade NPI prices remained strong, with Indonesian ore still influencing raw material pricing, quoted at 1,034 yuan per mtu. In terms of inventory, NPI inventory is at a low of 23,000 mt, refined nickel inventory slightly increased to 47,400 mt, and stainless steel inventory decreased by 10,000 mt to 980,000 mt. The initial excitement due to supply-side factors and low prices is gradually coming to an end, with high inventory and weak demand gradually suppressing price trends. The main support factor is concentrated in NPI prices, and if NPI prices weaken, the decline may intensify. Technically, SHFE nickel broke support, and shorts continued.

【Tin】

SHFE tin shed nearly half of the previous day's position increase, giving up gains above 290,000 yuan. This week, SHFE tin ingot inventory increased by 617 mt to 9,872 mt. LME 0-3 month premiums did not expand further, and with output risks in the two major producing countries, LME tin inventory of over 3,000 mt increased the probability of a squeeze. However, a squeeze is difficult, and LME tin's record rally must be supported by demand resonance. Tin price fluctuations have amplified, and prices are still expected to fluctuate between 280,000 and 290,000 yuan.