SMM Morning Comment For SHFE Base Metals (May 19)

SHANGHAI, May 19 (SMM) –

Copper

On Friday evening, LME copper opened at $9,519/mt, initially touching a high of $9,541.5/mt before slightly pulling back and then continuing to rise. It pulled back towards the end of the session, touching a low of $9,430/mt, and eventually closed at $9,440/mt, down 1.67%. Trading volume reached 14,000 lots, and open interest reached 294,000 lots. On the same evening, the most-traded SHFE copper 2506 contract opened at 77,920 yuan/mt, initially touching a high of 78,090 yuan/mt before fluctuating downward and touching a low of 77,550 yuan/mt during the session. It consolidated sideways towards the end of the session and eventually closed at 77,670 yuan/mt, down 0.82%. Trading volume reached 34,000 lots, and open interest reached 176,000 lots. On the macro front, the latest round of economic data showed that import prices rebounded in April, while consumer confidence remained sluggish in May due to heightened concerns over the impact of President Trump's trade policies. The US dollar index first fell and then rose, while copper prices first rose and then fell. Meanwhile, US Treasury Secretary Bentsen stated on Sunday that if countries fail to reach a trade agreement within the 90-day tariff suspension period, tariff rates will soon revert to "reciprocal" levels. On the fundamental front, formal trading of the SHFE copper 2506 contract commenced during the day on Friday. The backlog of warrants in warehouses led to tight spot market liquidity, with suppliers holding firm on their quotes. There were significant differences in premiums for different copper grades. The outflow of warrants this week may suppress premiums, but expectations of downstream purchases at lower prices may boost trading volume, with bullish and bearish factors coexisting. In terms of prices, it is expected that copper prices will encounter resistance today.

Aluminum

Futures Market: On Friday evening, the most-traded SHFE aluminum 2507 contract opened at 20,125 yuan/mt, with a high of 20,300 yuan/mt, a low of 20,100 yuan/mt, and closed at 20,190 yuan/mt, up 60 yuan/mt or 0.30% from the previous settlement. On the same day, LME aluminum opened at $2,500/mt, with a high of $2,504/mt, a low of $2,461.5/mt, and closed at $2,485.5/mt, down $14.5/mt or 0.58%.

Summary: Recently, the aluminum market has received support from improvements in the domestic and overseas macro environment, but bullish and bearish factors are intertwined. On the supply side, domestic aluminum capacity is approaching its ceiling, and insufficient recovery of hydropower in Yunnan has exacerbated regional supply tightness, limiting the increase in aluminum ingot production. On the cost side, a sudden revocation of mining licenses in Guinea last Friday night led to production halts in some mining areas, sparking market concerns about bauxite raw material supply and potentially driving up alumina costs, though the specific impact remains to be assessed. On the demand side, it faces dual pressures from domestic seasonal weakness and trade uncertainties, making significant growth unlikely in the short term. Aluminum ingot inventory has fallen to a low level for the same period, and tight spot liquidity is supporting aluminum prices. Overall, positive macro factors provide a floor support for aluminum prices, and low inventory further strengthens price resilience. However, off-season pressure on the demand side limits upside room. In the short term, attention should be paid to domestic and overseas demand performance as well as bauxite supply conditions.

Lead

On Friday, LME lead opened at $2,000/mt. During the Asian session, it fluctuated downward, reaching a low of $1,982.5/mt. As the US dollar index was in the doldrums, LME lead rebounded and made up for lost ground during the European session, hitting a high of $2,007/mt at the close, and eventually closed at $2,006/mt, up 0.07%.

On Friday evening, the most-traded SHFE lead 2506 contract opened at 16,885 yuan/mt. It briefly touched a low of 16,865 yuan/mt at the beginning of the session. Boosted by the rise in LME lead, it climbed to a high of 16,955 yuan/mt. With long and short positions intertwined, SHFE lead gave back some of its gains at the close, ending at 16,915 yuan/mt, down 0.09%.

On the consumption side, production at lead-acid battery enterprises remained relatively unchanged, with most enterprises focusing on purchases under long-term contracts. The current off-season trend in the lead-acid battery market persisted, remaining the biggest bearish factor. On the primary lead side, production at enterprises was relatively stable. Due to the SHFE lead delivery factors last week, in-plant inventory had been reduced (including simple transfers). Suppliers had no intention of further expanding spot discounts for sales, and the level of spot discounts was expected to remain stable. On the secondary lead side, as lead prices rebounded, losses in secondary lead production slightly narrowed, with some enterprises expressing interest in resuming operations. Coupled with the commissioning of new capacity, the extent of spot discounts for secondary refined lead may expand again. Overall, lead ingot supply is expected to increase this week, which may exacerbate inventory buildup. It is expected that lead prices will encounter resistance and maintain sideways movement.

Zinc

Last Friday, LME zinc opened at $2,726.5/mt. After opening, it briefly touched a high of $2,733/mt before declining all the way below the daily average line to a low of $2,679/mt. During European trading hours, as bulls increased their positions in SHFE zinc, the price center of SHFE zinc edged up slightly and fluctuated considerably around the daily average line. In the tail end of the session, LME zinc declined, eventually closing down at $2,686/mt, down by 40 yuan/mt or 1.47%. Trading volume decreased to 98,763 lots, while open interest increased by 3,392 lots to 228,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with the 60-day moving average acting as resistance above and the 10/20-day moving averages providing support below. On May 16, LME zinc inventory decreased by 975 mt to 164,200 mt, a decline of 0.59%. Trump's tariff policy has introduced new uncertainties, with US inflation expectations hitting a new high while consumer confidence index declined, increasing macro uncertainties and putting LME zinc under pressure to decline.

Last Friday, the most-traded SHFE zinc 2506 contract opened at 22,480 yuan/mt. In the early session, as bulls increased their positions, SHFE zinc rose to a high of 22,565 yuan/mt. Subsequently, as bulls reduced their positions, SHFE zinc fluctuated downward all the way, touching a low of 22,415 yuan/mt. It eventually closed down at 22,425 yuan/mt, down by 75 yuan/mt or 0.33%. Trading volume decreased to 53,048 lots, while open interest decreased by 1,861 lots to 92,485 lots. Last Friday, SHFE zinc recorded a bearish candlestick, with the 40/60-day moving averages acting as resistance above and the 10/20-day moving averages providing support below. On the fundamental side, there are still expectations of a subsequent easing on the supply side. Meanwhile, the recent continuous inflow of imported zinc ingots has provided some supplement to domestic spot cargo. There are no obvious bright spots in downstream consumption, and SHFE zinc lacks sufficient support, causing its price center to decline.

Tin

SHFE Tin Price Trend Last Week: Fluctuated considerably before holding at highs. Prices jumped initially and then pulled back at the start of the week, buoyed by positive expectations for the China-US economic and trade negotiations. However, prices subsequently pulled back after hitting highs and fluctuated around 260,000 yuan/mt due to weak US economic data (GDP contraction on a QoQ basis, elevated PCE inflation) and a stronger US dollar. During the night session on May 13, SHFE tin closed at 264,570 yuan/mt, up 1.33%, with market sentiment briefly supported by favourable macro front. Prices fluctuated upward mid-week, primarily driven by easing market concerns as US April inflation cooled, coupled with expectations of tighter ore supply. On May 15, prices held at highs, with the most-traded contract closing at 265,210 yuan/mt, down 0.21%, while spot quotes rose to 266,750 yuan/mt, reflecting smelters' refusal to budge on prices. Prices adjusted within a narrow range over the weekend, maintaining an overall pattern of high-level fluctuations, but were significantly capped by the 60-day moving average (approximately 265,000 yuan).

Last week, the domestic and overseas tin markets collectively exhibited a pattern of weak supply and demand, with tin prices fluctuating rangebound under the influence of macro sentiment and fundamental factors. In terms of supply, refined tin production in May is expected to decline MoM, but the spot tin market will continue to face inventory tightness in the short term. The Bisie tin mine in the Democratic Republic of the Congo resumed production in phases, with the first batch of tin concentrates shipped on May 9. However, it is not expected to enter the smelting process until June, making it difficult to alleviate the supply tightness in the short term. On the demand side, no significant improvement has been observed. High tin ingot prices have led to sluggish restocking intentions in the electronics/home appliance industries, causing blockages in industry chain transmission and further reducing scrap circulation. The operating rates of refined tin smelters in Yunnan and Jiangxi provinces remained low, with a combined operating rate of 56.85%. Processing fees were at historical lows, putting pressure on smelting profits. On the international macro front, the US GDP contracted by 0.3% QoQ in Q1, with core PCE inflation rising to 3.5%, consumer confidence falling to historical lows, and the manufacturing PMI dropping to 48.7, indicating increased downward pressure on the economy. The US Fed kept interest rates unchanged for the third consecutive time, emphasizing in its statement the heightened risks of inflation and rising unemployment. The US dollar index fluctuated at highs, suppressing the overall valuation of the non-ferrous metals sector. Looking ahead, it is expected that tin prices will continue to fluctuate rangebound in the absence of significant macro favourable or unfavourable developments. Investors are advised to closely monitor the progress of China-US economic and trade talks, US dollar trends, and domestic policy changes, and to operate cautiously.