SMM Morning Comment For SHFE Base Metals (Feb 26)

SHANGHAI, Feb 26 (SMM) –
Copper
Overnight, LME copper opened at $9,488.5/mt, initially rose to an intraday high of $9,528/mt, then declined all the way, hitting an intraday low of $9,385/mt near the close, and finally settled at $9,395/mt, down 1.13%. Trading volume reached 23,000 lots, and open interest stood at 294,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 77,200 yuan/mt, initially rose to a high of 77,590 yuan/mt, then fluctuated downward, hitting a low of 76,550 yuan/mt near the close, and finally settled at 76,680 yuan/mt, down 0.69%. Trading volume reached 47,000 lots, and open interest stood at 168,000 lots. Macro side, Trump introduced new measures that could reshape global supply chains, instructing the Department of Commerce to study imposing tariffs on imported copper, with Chile, Canada, and Mexico being the most affected countries, intensifying market concerns. Additionally, weak economic data from the US and Germany heightened fears of slowing energy demand, while some countries indicated potential increases in oil production, pushing oil prices to a two-month low, with copper prices following suit. Fundamentally, supply side, as the SHFE copper 2405 contract's subsequent structure has shifted to a backwardation structure, suppliers are mostly waiting for an inventory turning point and are not in a hurry to sell. Demand side, downstream buying interest remains weak, coupled with fluctuating copper prices, leading to significant market caution and overall poor demand. Price side, tariff threats continue to loom over the market; however, a large-scale power outage in Chile affecting copper mines provided some fundamental support. Copper prices are expected to have limited downside today.
Aluminum
Overnight, the most-traded SHFE aluminum 2504 contract opened at 20,550 yuan/mt, hitting a high of 20,680 yuan/mt and a low of 20,540 yuan/mt, before closing at 20,575 yuan/mt, up 30 yuan/mt or 0.15%. Yesterday, LME aluminum opened at $2,650/mt, reached a high of $2,669/mt and a low of $2,627/mt, and closed at $2,639/mt, down $13.5/mt or 0.51%.
Summary: Macro-wise, US President Trump introduced the latest measures that could reshape the global supply chain, directing the US Department of Commerce to study imposing tariffs on imported copper. Fundamentals side, cost-side support continues to weaken; supply side remains stable with slight increases, with overall changes being relatively small; demand side, driven by rising aluminum prices, end-user enterprises are adopting a wait-and-see approach, and shipments from downstream aluminum semis enterprises show little improvement. Factory raw material inventory turnover days are struggling to recover, with stockpiling mainly based on rigid demand and consumption of finished product inventories. Domestic aluminum ingot and aluminum billet social inventories have climbed to 1.194 million mt, surpassing the key thresholds of 1 million mt and 1.1 million mt, and are now approaching the 1.2 million mt mark. Currently, most suppliers are optimistic about the aluminum market outlook, and it is expected that after entering March, the inventory turning point will gradually emerge. With policy support, aluminum ingot inventories are expected to remain low in the long term, and the spot market sentiment of holding back cargoes is strengthening. With unstable macro sentiment and consumption realization still needing observation, the market remains cautious about aluminum price fluctuations and adjustments.
Lead
Overnight, LME lead opened at $1,986/mt and fluctuated downward during the Asian session. Due to weak US consumer confidence data, the US dollar index pulled back slightly but remained above the 106 mark, ultimately closing with a small decline. During the European session, LME lead first dipped and then rebounded, briefly touching a low of $1,978/mt before climbing, peaking at $2,011.5/mt by the end of the session, and closing at $2,000/mt, up 0.76%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,125 yuan/mt, briefly touching a low of 17,090 yuan/mt in early trading. Later, supported by the upward movement of LME lead, it rebounded, peaking at 17,170 yuan/mt by the end of the session and closing at 17,165 yuan/mt, up 0.2%.
Recently, the lead ingot market has seen relatively ample circulating supply, with downstream battery producers mostly producing based on sales, and only a few operating at full capacity. Lead ingot procurement demand remains limited in the short term. While there are several bearish factors for lead prices, the tight supply-demand balance on the raw material side continues to provide some support. However, some smelters in certain regions reported moderate arrivals of scrap batteries, and further observation of raw material supply changes is needed.
Zinc
Overnight, LME zinc opened at $2,846/mt. In early trading, LME zinc fluctuated around the daily moving average, reaching a high of $2,847.5/mt. Subsequently, with bears increasing positions, LME zinc fluctuated downward below the daily moving average. After a slight rebound, it pulled back again, hitting a low of $2,805/mt by the end of trading and closing down at $2,805.5/mt, a decrease of $39.5/mt or 1.39%. Trading volume decreased to 94,430 lots, while open interest increased by 2,377 lots to 233,000 lots. Overnight, LME zinc recorded a bearish candlestick, with support provided by the lower Bollinger Band. LME zinc inventory increased by 3,775 mt to 164,775 mt (2.34%). Overseas social inventory continued to rise, putting pressure on LME zinc. Currently, Trump has announced an investigation into the copper industry, with officials indicating that Trump favors imposing copper tariffs over quotas. The tariff disruptions persist, while a massive power outage in Chile, affecting over 98% of the population, has led the government to declare a "state of disaster," potentially impacting mining operations. LME zinc is expected to maintain a fluctuating trend in the short term.

Overnight, the most-traded SHFE zinc 2504 contract opened at 23,500 yuan/mt. Subsequently, with bulls increasing positions, SHFE zinc climbed to a high of 23,670 yuan/mt. However, bears increased positions, causing SHFE zinc to decline continuously, ultimately closing down at 23,525 yuan/mt, a decrease of 70 yuan/mt or 0.30%. Trading volume decreased to 56,889 lots, while open interest increased by 2,308 lots to 92,888 lots. Overnight, SHFE zinc recorded a bullish candlestick, with resistance from various moving averages above and support from the lower Bollinger Band below. Domestic demand conditions remain unclear, with end-use consumption yet to recover fully. Meanwhile, the upward trend in domestic processing fees is expected to persist. SHFE zinc is expected to maintain fluctuating movements.
Tin
US Fed's Barkin stated on Tuesday that he would adopt a wait-and-see approach to the central bank's interest rate policy until inflation clearly returns to the Fed's 2% target level. Barkin noted that the current uncertainty, whether driven by trade and other policy changes under the Trump administration or other factors, requires the central bank to remain cautious when concluding the fight against inflation. He believed that under such uncertainty, it is difficult to make significant monetary policy adjustments. Therefore, he preferred to wait and see how this uncertainty unfolds and how the economy responds. Barkin also mentioned that interest rates should remain moderately restrictive until officials are more confident that inflation is returning to the 2% target. However, recent spot market transactions have remained sluggish, with most traders reporting sales of less than 10 mt, while a few traders managed to sell around one truckload. Traders generally reported low purchase willingness from downstream clients, with most adopting a wait-and-see attitude. Some downstream enterprises indicated that post-holiday orders were relatively weak, coupled with pre-holiday inventory preparations, leading to overall low purchase demand. If SHFE tin prices continue to hover at high levels, the spot market is expected to remain in a sluggish state.
Nickel
The mainstream spot premium quotation range for Jinchuan No. 1 nickel was 1,600-1,900 yuan/mt, with an average premium of 1,750 yuan/mt, down 200 yuan from the previous trading day. The premium/discount range for Russian nickel was -100 to 100 yuan/mt, remaining on par with the previous trading day. Futures: Nickel prices fluctuated after opening today, declining by 0.57% to a low of 123,820 yuan/mt. Regarding spot premiums, Jinchuan nickel fell by 200 yuan compared to the previous trading day, mainly due to poor performance in the afternoon session yesterday, leading to sluggish market transactions. Traders opted to lower prices to stimulate transactions, narrowing the premium range. From a technical perspective and market sentiment, the SHFE nickel 2503 contract showed fluctuating trends in the morning session, with trading volume below expectations. Downstream demand remained weak, and overall market activity was low. Regarding the price spread with nickel sulphate, nickel briquette prices were 123,450-123,700 yuan/mt, with an average price of 123,575 yuan/mt, down 575 yuan/mt from the previous trading day's spot price. Nickel sulphate remained at a discount to refined nickel.