SMM Morning Comment For SHFE Base Metals (Mar 7)

SHANGHAI, Mar 7 (SMM) –
Copper
Futures Market: Overnight, LME copper opened at $9,631.5/mt, bottomed at $9,616/mt during early trading amid fluctuations, then fluctuated upward during the session, peaking at $9,739/mt near the close. Subsequently, the center shifted lower, and it finally settled at $9,689/mt, up 0.99%. Trading volume reached 28,000 lots, and open interest stood at 302,000 lots. Overnight, the most-traded SHFE copper 2504 contract opened at 78,500 yuan/mt, bottomed at 78,320 yuan/mt during early trading amid fluctuations, then fluctuated upward during the session, peaking at 79,280 yuan/mt near the close. It finally settled at 79,200 yuan/mt, up 1.40%. Trading volume reached 46,000 lots, and open interest stood at 174,000 lots.
Prices: Macro side, Thursday's US data was mixed, providing more evidence of an economic slowdown. Investors were concerned about the US economic outlook, and the US dollar index continued to decline, remaining at low levels, which supported copper prices. Additionally, the temporary suspension of US tariffs on Mexico and Canada further bolstered copper prices. Fundamentals side, with slow destocking and a high proportion of warehouse warrants, the available market supply of copper cathode gradually decreased, pushing premiums higher. However, the sharp rise in copper prices once again suppressed consumption. Overall, with the US dollar index remaining at low levels, copper prices are expected to find support at the bottom today.
Aluminum
Futures Market: The most-traded SHFE aluminum 2504 contract opened at 20,865 yuan/mt overnight, hitting a high of 20,925 yuan/mt and a low of 20,840 yuan/mt, and closed at 20,915 yuan/mt, up 105 yuan/mt or 0.5%. Yesterday, LME aluminum opened at $2,664.5/mt, reached a high of $2,703.5/mt and a low of $2,663.5/mt, and closed at $2,703/mt, up $44.5/mt or 1.67%.
Summary: Overseas, US tariff policies have intensified disruptions, with Midwest premiums exceeding $900/mt. While automotive tariffs were exempted, steel and aluminum tariffs remained unchanged. Domestically, the Two Sessions released signals to stabilize the economy, with a GDP target of 5% and measures to stabilize the real estate and stock markets, providing macro support for aluminum prices. Fundamentals side, domestic aluminum production resumption is progressing, with capacity expected to be released by the end of March. However, costs have slightly increased. As of this Thursday, the immediate full average cost of domestic aluminum was approximately 17,446 yuan/mt, up 408 yuan/mt WoW, mainly due to stable alumina prices this week but significant increases in auxiliary material prices, leading to a slight rise in aluminum costs. In terms of inventory, aluminum ingot inventory decreased to 871,000 mt during the week, down 15,000 mt from Monday, marking the first destocking signal. Coupled with the "golden March and silver April" peak season and PV rush for installations, aluminum consumption support has strengthened. Overall, macro factors are mixed, with domestic macro bullish sentiment unchanged, while overseas trade barriers increase but remain highly uncertain, leaving the market in a state of contention. Fundamentals side, both supply and demand are growing. As the consumption peak season approaches, most sectors are seeing a rebound in orders and operating rates. Combined with the initial destocking signal in aluminum ingot social inventory, aluminum prices are strongly supported. The most-traded SHFE aluminum contract is expected to operate in the range of 20,500-21,200 yuan/mt next week.
Lead
Overnight, LME lead opened at $2,028/mt. Boosted by the rise in SHFE lead and the weakening US dollar, the overall trading center of LME lead moved further upward compared to the previous day. Notably, during the nighttime session, the US dollar index hit a new four-month low, leading to a broad rally in base metals. LME lead surged to $2,054.5/mt at one point, marking a new high since December 11, 2024. By the close, some longs took profits, and LME lead ultimately settled at $2,039/mt, up 0.44%.

Overnight, supported by macro policy expectations, the most-traded SHFE lead 2504 contract opened at 17,440 yuan/mt. After the opening, SHFE lead fluctuated upward, reaching an intraday high of 17,530 yuan/mt, the highest level since December 24, 2024. In the latter half of the trading session, the upward momentum of the longs weakened, and SHFE lead gave back part of its gains, finally closing at 17,500 yuan/mt, up 0.69%. Its open interest reached 48,542 lots, an increase of 390 lots compared to the previous trading day.

Currently, during the "Two Sessions" period, numerous economic stimulus policies have been proposed, including the issuance of ultra-long-term special government bonds to support the trade-in of consumer goods. The People's Bank of China has also stated that it will cut interest rates and RRR at an appropriate time this year. Supported by policy expectations, base metal prices have continued to strengthen. Meanwhile, as lead prices rise, downstream enterprises' pessimistic sentiment toward the market has eased, and they have gradually made purchases as needed. Inventory in warehouses in the major consumption areas of Jiangsu and Zhejiang has reversed to a decline. Additionally, a pollution event has recently occurred in the Beijing-Tianjin-Hebei region and surrounding areas, with heavy pollution weather yellow or orange alerts issued in Hebei, Henan, and Shandong, affecting production and transportation on the supply side. Overall, in the short term, lead prices are expected to fluctuate upward, with the trading center of SHFE lead gradually moving higher.
Zinc
Overnight, Trump signed an amendment to temporarily suspend tariffs on Mexico and Canada goods that comply with the agreement; the US and Ukraine plan to hold talks in Saudi Arabia next week to discuss a preliminary Russia-Ukraine ceasefire; US Fed Governor Waller stated that there is no need for an interest rate cut in March, and the expectation of two interest rate cuts this year remains reasonable; US Treasury Secretary Besant announced plans to shut down Iran's oil industry, drone manufacturing capabilities, and its access to the global financial system; the European Central Bank cut interest rates by 25 basis points as expected; the National Development and Reform Commission (NDRC) announced plans to promote the establishment of a "carrier-class" national venture capital guidance fund, which is expected to attract and drive nearly 1 trillion yuan in local and social capital; the People's Bank of China stated that it will cut the reserve requirement ratio (RRR) and interest rates at an appropriate time this year and will innovatively launch a "technology board" in the bond market.

Overnight, LME zinc opened at $2,887/mt. In early trading, LME zinc briefly dipped to a low of $2,878.5/mt before its center shifted upward, fluctuating near the daily average line. By the European trading session, bulls increased their positions, driving LME zinc to fluctuate upward, peaking at $2,931/mt during the night session. It ultimately closed higher at $2,926/mt, up $40/mt or 1.39%. Trading volume increased to 13,503 lots, and open interest rose by 449 lots to 223,000 lots. Overnight, LME zinc recorded a large bullish candlestick. The US dollar index declined for the fourth consecutive day, and Trump's signing of the amendment to suspend tariffs on Mexico and Canada goods eased market concerns over tariffs. Base metals broadly rose, and LME zinc's rally is expected to maintain high-level fluctuations.

Overnight, the most-traded SHFE zinc 2504 contract opened at 24,100 yuan/mt. In early trading, SHFE zinc fluctuated along the daily average line. Bears exited the market, while bulls entered, driving SHFE zinc upward, peaking at 24,160 yuan/mt by the session's end. It ultimately closed higher at 24,150 yuan/mt, up 150 yuan/mt or 0.63%. Trading volume decreased to 62,947 lots, and open interest fell to 91,409 lots. Overnight, SHFE zinc recorded a small bullish candlestick. The Bollinger Bands' middle track formed resistance above, while the 40-day moving average provided support below. Macro sentiment improved as the US temporarily suspended tariffs on Mexico and Canada goods. Domestically, the NDRC announced plans to promote the establishment of a "carrier-class" national venture capital guidance fund, expected to attract and drive nearly 1 trillion yuan in local and social capital. The People's Bank of China stated that it will cut interest rates at an appropriate time this year. SHFE zinc's center shifted upward, and zinc prices are expected to primarily fluctuate at high levels.

Tin
US Fed Governor Waller delivered a speech at The Wall Street Journal CFO Network Summit, stating that he does not support an interest rate cut in the upcoming March meeting but remains optimistic about the possibility of a rate cut in 2025. He indicated that the chances of a rate cut this year are expected to be between two and three times. Waller mentioned in his speech that he hopes to see more updated data on the US economic situation to determine the appropriate timing for further rate cuts. He noted that, considering changes in trade policies under the Trump administration and the far-reaching impact of tariff policies, the current economic data does not fully reflect the fundamentals of the economy. He stated, "You get this data point and then try to figure out what is a fundamental signal and what might just be tariff noise, which is very challenging."

In the tin ingot spot market, transactions were relatively sluggish yesterday, with most downstream enterprises showing low purchasing willingness and largely adopting a wait-and-see attitude. Some traders reported scattered transactions yesterday, while a few mentioned sales of around one truckload. Overall, market transactions were weak. During the night session, SHFE tin prices continued to climb, returning to the 260,000 yuan/mt level, with market sentiment becoming more cautious as participants awaited clearer direction.
Nickel
The mainstream spot premium quotation range for Jinchuan No. 1 nickel was 1,500-1,600 yuan/mt, with an average premium of 1,550 yuan/mt, down by 50 yuan/mt from the previous trading day. The premium/discount quotation range for Russian nickel was -100 to 0 yuan/mt, with an average discount of -50 yuan/mt, unchanged from the previous trading day.
Futures: Yesterday, nickel prices surged rapidly after the opening, followed by a slight pullback, and then strengthened again. As of 11:30, the closing price was 128,280 yuan/mt, up 0.05% from the previous trading day's settlement price, with a high of 128,530 yuan/mt.
Spot Premiums/Discounts: The premium for Jinchuan brand nickel decreased by 50 yuan compared to the previous trading day, mainly due to traders' eagerness to sell, leading to a decline in premium levels, reflecting subtle changes in the market's supply-demand relationship.
From a technical perspective and market sentiment, the SHFE nickel 2504 contract showed strong upward momentum at the opening. Although it experienced a slight pullback, its subsequent strengthening demonstrated overall optimism in the market. This sentiment was closely related to frequent policy announcements in Indonesia and the recent firmness in nickel ore transaction prices. Additionally, the Two Sessions contributed to boosting market confidence to some extent. However, refined nickel inventory remained at high levels. In the short term, the tug-of-war between favourable macro factors and bearish fundamentals continued.