US Copper Weighted Index Hits New High; Focus on Profit Taking [Institutional Commentary]

【Copper】

On Thursday, SHFE copper extended its gains above 81,500 yuan, with the weighted average of the US market hitting a record high, though the most-traded US copper contract has yet to reach new highs. Domestic spot copper rose to 81,440 yuan, with SHFE copper on parity and Guangdong at a premium of 185 yuan. Technically, attention is on the performance of the weighted index of the US market at record levels. Overnight, the US Fed maintained interest rates, downgraded the annual economic growth forecast to 1.7%, emphasized inflation risks, and expressed uncertainty, but still expected two cumulative 50-basis-point interest rate cuts within the year. SHFE copper mainly followed the upward trend, with the upper range expanding to 81,500-82,500 yuan. If there is a pullback, the focus will be on the US market copper.

【Aluminum & Alumina】

Today, SHFE aluminum fluctuated upward, with spot discounts in East China and South China around 40 yuan. This year's inventory buildup for aluminum ingot and billet is similar to last year, with the turning point for aluminum ingot slightly earlier. In the past week, destocking of 28,000 mt was strong, and the market expects robust consumption during the peak season, with attention on the pace of destocking. In the short term, SHFE aluminum continues to test the resistance at 210,000 yuan, oscillating above 205,000 yuan. Alumina prices continued to decline, with domestic spot transactions falling to around 3,100 yuan, and the latest overseas Indonesian transaction price dropping to 409 US dollars. Alumina operating capacity is at a historical high, and the supply-demand balance remains loose. The decline in ore prices has led to a lower cost center. Alumina prices will remain under pressure until large-scale production cuts occur.

【Zinc】

Zinc prices pulled back, with downstream buyers restocking at lower levels, improving spot trades. SMM zinc social inventory decreased by 4,900 mt MoM to 131,000 mt. The slower-than-expected destocking in the overseas market and inventory buildup in the domestic market can be seen as the final manifestation of tight mine supply in 2024, which is insufficient to push zinc prices higher. During the traditional peak season, downstream rigid demand supports prices. The EU's 80 billion euro defense financing plan to reduce dependence on the US has somewhat boosted consumer confidence, but internal divisions cast doubt on its actual implementation. After March, domestic smelters turned profitable, and expectations for increased zinc ingot production strengthened. In Q2, additional mine supply will be released, and the news of the US reviewing global key shipping lanes has added to export uncertainties. Real estate remains a drag, infrastructure support is limited, and manufacturing performance is mixed. Zinc should still be treated with a bearish bias.

【Lead】

The spread between futures and spot prices remained at a high of 265 yuan/mt, which is unfavorable for warrant outflows. Some primary lead smelters in Henan are undergoing maintenance, leading to a temporary tight supply of lead ingots. Secondary lead prices increased to collect raw materials, with the price difference between primary metal and scrap maintaining at 75 yuan/mt, providing some support to prices. Some imported crude lead entered the domestic market, mostly directly as raw material for smelters. Downstream buyers mainly purchased through long-term contracts, with limited spot orders, and SMM lead social inventory continued to rise to 74,000 mt. With overseas lead supply, SHFE lead lacks further upward momentum, with 17,880 yuan/mt seen as a strong resistance level.

【Nickel & Stainless Steel】

SHFE nickel fluctuated downward, with active market trading. Supply disruptions related to Indonesia were concentrated, mainly affecting sentiment on the raw material side, and leading to higher high-grade NPI prices and NPI destocking, offsetting the long-term surplus trend. Jinchuan premiums fell to 1,400 yuan, Russian nickel at a discount of 100 yuan, and electrodeposited nickel at a discount of 100 yuan. High-grade NPI prices significantly strengthened, with Indonesian ore still influencing raw material pricing, with the latest quote at 1,015 yuan per mtu. Inventory-wise, NPI inventory dropped by 6,000 mt to 23,000 mt, refined nickel inventory increased by 4,500 mt to 49,000 mt, and stainless steel inventory rose by nearly 10,000 mt to 959,000 mt. Technically, SHFE nickel met resistance near 135,000 yuan, with attention on whether a rebound top structure forms.

【Tin】

SHFE tin recovered from below 280,000 yuan, closing higher after fluctuating. Today, spot tin was 240,200 yuan, still slightly at a discount to the delivery month contract. The market continues to monitor the situation in the DRC, which is currently stalled. Tin prices are expected to fluctuate between 275,000-290,000 yuan/mt at high levels.