SMM Morning Comment For SHFE Base Metals (Feb 14)

SHANGHAI, Feb 14 (SMM) –

Copper

Overnight, LME copper opened at $9,457/mt, initially edged upward before fluctuating downward, hitting a low of $9,415/mt during the session. It then fluctuated upward, reaching a high of $9,510/mt near the close, before slightly pulling back to settle at $9,476/mt, up 0.07%. Trading volume reached 20,000 lots, and open interest stood at 291,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 77,500 yuan/mt, quickly hitting a high of 77,590 yuan/mt before fluctuating rangebound downward, reaching a low of 77,130 yuan/mt during the session. It then rebounded, forming a "V-shape," and slightly pulled back near the close to settle at 77,450 yuan/mt, up 0.06%. Trading volume reached 24,000 lots, and open interest stood at 180,000 lots.

Prices: On the macro side, US PPI data significantly exceeded expectations, but its subcomponents suggested that the PCE data to be released later this month might fall short of expectations. The US dollar weakened. Later, Trump announced that reciprocal tariffs would be imposed on all countries levying tariffs on US imports, with tariffs potentially starting within weeks. This temporarily narrowed the USD/JPY decline before the dollar fell to lower levels, supporting copper prices. On the fundamentals side, copper prices hovered at highs, with downstream demand primarily on an as-needed basis, and overall consumption remained stable. According to SMM, inventory buildup continued in major domestic regions this week, but the pace has significantly slowed compared to last week. As of Thursday, February 13, copper inventories in major regions across China increased by 21,400 mt from Monday to 326,200 mt, up 53,100 mt from last Thursday and 160,400 mt from pre-Chinese New Year levels. The post-holiday inventory buildup exceeded the same period last year by 42,300 mt. In terms of prices, macro factors were supportive, but fundamental support was relatively limited. Copper prices are expected to see limited gains today.

Aluminum

Overnight, the SHFE aluminum 2503 contract opened at 20,505 yuan/mt, with a high of 20,550 yuan/mt and a low of 20,470 yuan/mt, closing at 20,540 yuan/mt, down 20 yuan/mt or 0.10% from the previous day. Yesterday, LME aluminum opened at $2,624/mt, with a high of $2,634.5/mt and a low of $2,583.5/mt, closing at $2,608/mt, down $18.5/mt or 0.70%.

Summary: Recently, macro factors have been mixed. Domestically, efforts to boost consumption continue, while overseas trade barriers are increasing. However, domestic enterprises and market sentiment have shown limited response to these developments. In the short term, the global aluminum market is expected to undergo structural adjustments influenced by policies. Continued attention is needed on changes in trade policies in Europe and the US and demand in major consumer markets. Fundamentals side, the pressure of resumed production in the aluminum supply chain has re-emerged, with domestic operating capacity expected to rise slowly in February. The average spot price of alumina continues to weaken, driving aluminum costs lower, with cost-side support further weakening. Although both supply and demand are increasing, post-holiday demand recovery has exceeded expectations. Despite the lack of cost support, aluminum futures and spot prices remain strong. Inventory-wise, the market is still in a post-holiday inventory buildup phase, with inventories expected to continue rising rapidly this week. Demand side, the operating rate of leading domestic downstream aluminum processing enterprises rebounded significantly this week, up 5.7 percentage points WoW to 56.8%, mainly driven by post-Chinese New Year resumption of production, though recovery varied across sectors. In the future, with increasing PV demand and full resumption of work and production by end-users, and given limited supply-side growth, aluminum prices are expected to fluctuate at high levels in the short term.

Lead

Overnight, LME lead opened at $1,976.5/mt. During the Asian trading session, the market saw sluggish trading, with LME lead consolidating between $1,975-1,980/mt. Entering the European session, the US dollar index fell consecutively, boosting base metals. LME lead also fluctuated upward, approaching the key $2,000/mt level and recovering nearly all losses from the previous day. LME lead ultimately closed at $1,991.5/mt, up 0.94%.

Overnight, the most-traded SHFE lead 2503 contract opened at 17,150 yuan/mt. With visible lead ingot inventory increasing, SHFE lead nearly broke below 17,100 yuan/mt at the start of trading. Later, driven by LME lead's gains, SHFE lead rebounded but mostly consolidated between 17,125-17,160 yuan/mt. It eventually closed at 17,125 yuan/mt, down 0.03%, with open interest at 37,256 lots, an increase of 94 lots from the previous trading day.

With only two working days left until the delivery of the SHFE lead 2502 contract, suppliers are increasingly transferring to delivery warehouses, especially near major consumption areas where inventory growth is evident. This week, most upstream and downstream enterprises in the lead industry chain have resumed production. Some downstream enterprises are buying the dip as needed, leading to marginal improvement in spot transactions. However, due to issues with orders and worker availability, most enterprises have limited demand for lead ingots, causing spot discounts to widen further compared to the beginning of the week. Before delivery, delivery brands are expected to continue transferring to warehouses, and visible inventory may continue to increase.

Zinc

Overnight, LME zinc opened at $2,866.5/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average, reaching a high of $2,872/mt. During the midday session, it began to fluctuate downward, hitting a low of $2,833/mt by the end of the session, and finally closed down at $2,837.5/mt, a decrease of $28.5/mt or 0.99%. Trading volume decreased to 8,888 lots, and open interest fell by 1,641 lots to 225,000 lots. Overnight, LME zinc recorded a bearish candlestick, with support provided by the 10-day moving average below. The announcement by Trump of tariffs on US imports heightened concerns over global trade, and bearish macro sentiment pressured zinc prices, causing LME zinc to pull back slightly from highs.

Overnight, the most-traded SHFE zinc 2503 contract opened at 23,745 yuan/mt. After the opening, SHFE zinc fluctuated around the daily moving average, hitting a low of 23,670 yuan/mt during the session. It then rebounded from the low to reach a high of 23,850 yuan/mt, before pulling back from the high and finally closed down at 23,737.5 yuan/mt, a decrease of 40 yuan/mt or 0.17%. Trading volume decreased to 53,235 lots, while open interest increased by 175 lots to 84,880 lots. Overnight, SHFE zinc recorded a bearish candlestick, with resistance formed by the 40-day moving average above. Although the inventory buildup of zinc ingots this week was limited and low inventory still provided support for zinc prices, and downstream enterprises gradually resumed production after the Lantern Festival, short-term spot consumption of zinc ingots showed no significant improvement. As a result, SHFE zinc's upward momentum was limited, maintaining a fluctuating trend.

Tin

According to CME "US Fed Watch," the probability of the US Fed keeping interest rates unchanged in March is 97.5%, while the probability of a 25-basis-point interest rate cut is 2.5%. By May, the probability of maintaining the current interest rate is 86.8%, with a cumulative 25-basis-point interest rate cut at 12.9% and a cumulative 50-basis-point interest rate cut at 0.3%. In the futures market, SHFE tin prices fluctuated downward during yesterday's daytime session. By the close of the daytime session, the price of the most-traded SHFE tin contract stabilized at around 258,000 yuan/mt. During the night session, SHFE tin prices climbed slightly before stabilizing, adjusting to around 259,500 yuan/mt before the close. The relatively small change in the overall open interest of SHFE tin contracts also reflected a decline in market participation. In the spot market, activity remained relatively subdued. Most end-user enterprises have resumed full operations after the Chinese New Year holiday, leading to a slight increase in spot market transactions, though the overall market remained quiet.

Nickel

Spot premiums/discounts: Mainstream spot premiums for Jinchuan Nickel No. 1 were quoted in the range of 2,000-2,300 yuan/mt, with an average premium of 2,150 yuan/mt, up 100 yuan compared to the previous trading day. Russian nickel premiums/discounts were quoted in the range of -100 to 100 yuan/mt, with an average premium of 0 yuan/mt, up 50 yuan compared to the previous trading day. Futures: Nickel prices opened lower in the morning, with a decline of 0.16%, reaching a low of 124,010 yuan/mt. Regarding spot premiums/discounts: Jinchuan brand nickel premiums rose slightly compared to yesterday, possibly influenced by domestic fiscal policies, with market sentiment relatively high. Spot premiums/discounts for other nickel plate brands in the spot market showed little overall change. Nickel prices experienced a process of "decline-rebound-pullback" after opening. Jinchuan brand nickel premiums saw a slight increase. Spot premiums/discounts for other nickel plate brands remained largely stable this month. In the short term, attention should be paid to changes in the nickel surplus situation, with the most-traded contract expected to fluctuate within the range of 120,000-130,000 yuan. Regarding the price spread with nickel sulphate: Today, nickel briquette prices were 123,750-124,250 yuan/mt, with an average price of 124,000 yuan/mt, down 50 yuan/mt compared to the previous trading day's spot price. Nickel sulphate remains at a discount to refined nickel.