SMM Morning Comment For SHFE Base Metals On July 22

SHANGHAI, July 22 (SMM) –

Copper

Last Friday night, LME copper opened at $9,350.5/mt. After a brief initial fluctuation, it rose to a high of $9,374/mt, then fluctuated downward, touching a low of $9,283/mt at the end of the trading session, and finally closed at $9,290/mt, down 0.86%. Trading volume reached 25,000 lots, and open interest reached 306,000 lots. Last Friday night, the most-traded SHFE copper 2408 contract opened at 76,350 yuan/mt. After a brief initial decline, it rose to a high of 76,450 yuan/mt, then fluctuated downward, touching a low of 75,990 yuan/mt at the end of the trading session, and finally closed at 76,000 yuan/mt, down 1.02%. Trading volume reached 30,000 lots, and open interest reached 148,000 lots.

Macro side, last Friday, Microsoft experienced a severe service outage, affecting global companies and users, impacting the LME, multiple banks, and triggering a risk aversion reaction in the financial markets. Additionally, concerns about real consumption demand led some speculators to take profits and exit the market.

Fundamentals, copper prices fell, and consumption demand followed suit. Due to the tight supply of both domestic and imported copper, spot premiums/discounts continued to rise and are expected to remain firm.

Price side, this week, the US core PCE data will be released, and the market is expected to adopt a wait-and-see attitude at the beginning of the week, with copper prices likely to consolidate.

Aluminum

Last Friday night, the most-traded SHFE aluminum 2409 contract opened at 19,555 yuan/mt, with a high of 19,600 yuan/mt, a low of 19,515 yuan/mt, and closed at 19,515 yuan/mt, down 100 yuan/mt, a decrease of 0.51%. The previous trading day, LME aluminum opened at $2,381.5/mt, with a high of $2,385.5/mt, a low of $2,350/mt, and closed at $2,350/mt, down $35.5/mt, a decrease of 1.49%.

Summary: On the macro front, the probability of Trump being elected has increased. The 20th Third Plenary Session of the CPC Central Committee concluded, potentially bringing new positive news, together with the renewed uncertainties from the Israeli-Palestinian conflict and the Russian-Ukrainian war, adding uncertainty to the market. On the fundamentals, domestic aluminum production supply is increasing, with some capacity still awaiting resumption. Downstream aluminum processing and end-user demand have entered the off-season, with the aluminum processing industry's operating rate falling to a low point. Social inventory destocking is weak and remains at a high level for the same period in nearly three years. The spot market may maintain spot discounts in the short term. The aluminum market currently lacks upward driving factors, as the off-season aluminum fundamentals continue to be bearish. SMM expects short-term aluminum prices to remain weak, with attention needed on macro changes impacting aluminum prices in the short term.

Lead

Last Friday, LME lead opened at $2,152.5/mt, with its trading range gradually moving downwards throughout the day. By the night session, the decline in LME lead expanded, reaching a low of $2,120/mt, the lowest since April 8, 2024, and finally closed at $2,121.5/mt, down 1.55%.

Last Friday, the most-traded SHFE lead 2409 contract opened at 19,465 yuan/mt. With expectations of supply resumption intensifying, SHFE lead showed a move downwards after a higher opening, trading around 19,330 yuan/mt. It eventually closed at 19,370 yuan/mt, down 0.39%; its open interest reached 100,000 lots, an increase of 8,415 lots from the previous trading day.

Zinc

Last Friday, LME zinc opened at $2,809.5/mt, reaching a high of $2,816/mt, then hitting a low of $2,768.5/mt, and eventually closed at $2,774/mt, down $23/mt, a decrease of 1.25%. The trading volume decreased to 10,320 lots, and the open interest was reduced by 1,058 lots to 223,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with LME inventory decreasing by 2,325 mt to 240,275 mt, a drop of 0.96%. The strong performance of the US economy pressured LME zinc downward. Concerns about zinc consumption emerged amid oversupply. It is expected that LME zinc will run weak today.

Last Friday, the most-traded SHFE 2409 zinc contract opened at 23,335 yuan/mt, briefly dipping to 23,325 yuan/mt, then reaching a high of 23,445 yuan/mt, and eventually closed at 23,355 yuan/mt, down 95 yuan/mt, a decrease of 0.41%. The trading volume decreased to 67,897 lots, and the open interest was reduced by 593 lots to 92,840 lots. Last Friday, SHFE zinc recorded a bullish candlestick. The 20th Third Plenary Session did not release more positive news, but domestic inventory continued to decrease. SHFE zinc is expected to fluctuate today.

Tin

Last Friday night, the most-traded SHFE tin contract closed at 260,500 yuan/mt, down 1,110 yuan/mt, a decrease of 0.42%. The highest price was 260,960 yuan/mt, and the lowest was 256,130 yuan/mt.

Last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0 yuan/mt over SHFE 2408 tin contract, versus discounts of 100 yuan/mt to premiums of 300 yuan/mt for delivery brands, and premiums of 400-600 yuan/mt for Yunxi brand. Last Friday morning, SHFE tin prices consolidated at low levels, and downstream procurement enthusiasm remained high, with some trader companies' inventories already cleared out. Overall, last Friday's spot market transactions remained active.

Nickel

Last week, SHFE nickel continued its downward trend, down approximately 3.58% WoW. By Friday, SHFE nickel closed at 130,170 yuan/mt. Last week, nickel prices recorded a larger decline affected by both fundamentals and macro factors. On the macro side, global attention was focused on the assassination attempt on Trump, which had a direct impact on the upcoming US election. After being shot, Trump might gain some sympathy and support from voters, potentially boosting his election prospects. According to previous reports, Trump announced during his campaign that if re-elected in the November election, he would significantly increase tariffs on Chinese goods, possibly imposing tariffs exceeding 60%, and plan to gradually reduce imports from China to zero deficit within four years. This would undoubtedly pose a significant challenge to China's manufacturing industry. Amid economic turmoil, risk-averse funds might choose to stay away from the non-ferrous metals market, which is closely related to manufacturing. Fundamentals side, the Philippines is currently experiencing slow shipments due to weather. Indonesia announced on Thursday that nickel and tin will be integrated into the local SIMBARA system. This system aims to provide comprehensive and transparent traceability of the nickel supply. Through this system, Indonesia can track nickel sales in real-time, including mining locations, processing, transportation, and export information, which will help ensure that producers comply with global standards and reduce illegal mining, child labor, and environmental damage. The data integration of the system will also improve government oversight efficiency. The specific impact on nickel supply still awaits further clarification from Indonesian authorities. In the domestic spot market, nickel prices saw a significant drop last week, leading to a rebound in downstream purchasing sentiment, with social inventories decreasing again during the week and market transactions heating up. However, it should be noted that this is merely due to restocking driven by rigid demand after conservative purchases amid previously high nickel prices, not a genuine recovery in end-user demand. Therefore, after nickel prices entered a downward channel, end-user demand did not show a significant increase. Future spot market transactions may see a shift. In summary, current macro sentiment exerts downward pressure on nickel prices. Although there were disruptions on the supply side, the specific impact has yet to materialize, and downstream demand significantly shrunk. Nickel prices are expected to fluctuate downward this week.