SMM Morning Comment For SHFE Base Metals (May 20)

SHANGHAI, May 20 (SMM) –

Copper

Overnight, LME copper opened at $9,500.5/mt. After fluctuating higher in early trading, it pulled back and touched a low of $9,495/mt. It then fluctuated considerably, approaching the close, it touched a high of $9,536/mt before pulling back slightly to close at $9,516/mt, up 0.81%. Trading volume reached 11,000 lots, and open interest reached 294,000 lots. Overnight, the most-traded SHFE copper 2506 contract opened at 77,980 yuan/mt. After fluctuating rangebound in early trading, it touched a low of 77,970 yuan/mt. It then fluctuated higher and approached the close, touching a high of 78,180 yuan/mt before closing at 78,160 yuan/mt, up 0.54%. Trading volume reached 18,000 lots, and open interest reached 168,000 lots. On the macro side, Moody's downgraded the deposit ratings of some major banks, including Bank of America and JPMorgan Chase, citing the downgrade of the US's rating last Friday, which led to a sharp drop in the US dollar index, providing bullish support for copper prices. On the fundamental side, from the supply side, a large number of delivery warrants had not yet been released, leading to tight market liquidity and low willingness among suppliers to sell at low prices. From the demand side, although copper prices fell during the day, trading sentiment remained poor, with just-in-time procurement from some downstream consumers dominating. As of Monday, May 19, SMM's national copper inventory in major regions increased by 7,200 mt WoW to 139,200 mt, marking the second consecutive week of inventory buildup. Currently, the market has some support for spot premiums due to tight liquidity, but factors such as inventory buildup and the expected release of warrants today are expected to curb spot premiums. In terms of prices, copper prices are expected to still have some upside room today.

Aluminum

Futures Market: Overnight, the most-traded SHFE aluminum 2507 contract opened at 20,050 yuan/mt, with a high of 20,100 yuan/mt, a low of 20,025 yuan/mt, and closed at 20,040 yuan/mt, down 70 yuan/mt or 0.35% from the previous close. On Monday, LME aluminum opened at $2,438/mt, with a high of $2,439/mt, a low of $2,436/mt, and closed at $2,437.5/mt, up $1.5/mt or 0.06%.

Summary: 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, the sudden revocation of mining licenses in Guinea and the issuance of production halt notices for the affected mining areas late Friday night have sparked market concerns about the supply of bauxite raw materials, potentially driving up alumina costs. However, the specific impact remains to be evaluated. On the demand side, it faces dual pressures from domestic seasonal weakness and trade uncertainties, making significant growth in the short term unlikely. On Monday, SMM statistics showed that domestic aluminum ingot inventory was 585,000 mt, a slight increase of 4,000 mt from last Thursday. There was a noticeable increase in arrivals over the weekend, but whether this will lead to inventory buildup depends on whether the restocking demand for export orders from downstream enterprises can match the increase in arrivals. Overall, favorable macro factors and low inventory levels provide support for aluminum prices, but the off-season pressure on the demand side limits upside room. In the short term, attention should be paid to the performance of domestic and overseas demand, as well as the supply situation of bauxite.

Lead

Overnight, LME lead opened at $1,997/mt, touching a high of $2,009/mt during the Asian session. However, due to the rebound and catch-up rally of the US dollar index, LME lead plunged during the European session, hitting a low of $1,957/mt at the close, and eventually closed at $1,964.5/mt, down 2.07%.

Overnight, the most-traded SHFE lead 2506 contract opened at 16,860 yuan/mt, touching a high of 16,880 yuan/mt in the early session. Dragged down by the domestic lead consumption performance and the decline in LME lead, SHFE lead hit a low of 16,780 yuan/mt at the close, and eventually closed at 16,780 yuan/mt, down 0.71%.

Recently, the lead-acid battery market has remained in the off-season, with downstream enterprises mostly in a state of production cuts, leading to limited demand for lead ingots. Meanwhile, primary lead production has remained stable, and with a slight improvement in secondary lead profits, new capacity has come online at secondary lead enterprises in Hunan and Guizhou provinces, leading to a steady increase in supply. The spot market is generally trading at a discount, with secondary refined lead quotes at a discount of 130-0 yuan/mt against the SMM 1# lead average price, diverting some downstream just-in-time demand. Primary lead quotes are at a discount of 200-80 yuan/mt against the SHFE lead 2506 contract, and the large spread between futures and spot prices has increased suppliers' willingness to transfer to delivery warehouses. After the delivery of the SHFE lead 2505 contract last week, delivery brand cargoes continued to transfer to social warehouses, and social inventory continued to increase. Recently, some imported crude lead has arrived in China, which may partially fill the scrap supply gap for secondary lead enterprises. Coupled with the commissioning of new capacity, there will still be inventory buildup pressure for lead ingots in the future. Overall, the upward momentum of lead prices is insufficient in the short term, and prices may remain in the doldrums.

Zinc

Overnight, LME zinc opened at $2,689.5/mt. After opening, LME zinc fluctuated considerably along the daily average line, reaching a high of $2,706.5/mt during the session. Entering the night session, the center of LME zinc moved downward, operating below the daily average line. It touched a low of $2,670.5/mt at the end of the session, closing down at $2,672.5/mt, a decline of $13.5/mt or 0.50%. Trading volume decreased to 84,672 lots, while open interest fell by 4,336 lots to 224,000 lots. LME zinc recorded three consecutive bearish candlesticks overnight, with the 40-day moving average acting as resistance above and the 20-day moving average providing support below. Atlanta Fed President Bostic reiterated his preference for only one interest rate cut this year, while Moody's downgraded the US credit rating, which had a certain impact on market sentiment, causing the center of LME zinc to pull back.

Overnight, the most-traded SHFE zinc 2506 contract opened at 22,415 yuan/mt. After opening, SHFE zinc briefly touched a high of 22,490 yuan/mt. Subsequently, as bulls reduced their positions, SHFE zinc plunged downward, operating below the daily average line and touching a low of 22,360 yuan/mt. Then, as bears reduced their positions, SHFE zinc rebounded, recovering most of the losses. However, at the end of the session, as bulls reduced their positions and exited the market, SHFE zinc moved downward again, operating below the daily average line. It closed down at 22,405 yuan/mt, a decline of 50 yuan/mt or 0.22%. Trading volume decreased to 44,280 lots, while open interest fell by 4,755 lots to 80,805 lots. SHFE zinc recorded a bearish candlestick overnight, with the 5-day moving average acting as resistance above and the lower Bollinger Band providing support below. Driven by the recent easing of trade tensions, consumption in some downstream sectors has shown a slight improvement. Meanwhile, expectations for an increase in supply still exist. Going forward, attention can be paid to end-user export orders. It is expected that zinc prices will maintain a fluctuating trend in the short term.

Tin

Futures Market: The most-traded SHFE tin contract (SN2506) opened slightly higher in the night session and maintained high-level fluctuations, closing at 264,390 yuan/mt, up 0.15% from the previous trading day, with total open interest reaching 25,600 lots.

Macro: (1) Xiaomi's strategic new product launch is scheduled for May 22, where it will unveil the "Xuanjie O1," which adopts the second-generation 3nm process technology. (Bullish ★) (2) Jensen Huang: NVIDIA will launch its next-generation GB300 AI system in Q3. It will build an AI supercomputer in Taiwan, China, and NVIDIA's DGX Spark has already entered full production. (Bullish ★) (3) With the continuous implementation of the "trade-in" policy, coupled with automakers' new product launches and increased self-funded sales promotions, the consumer vitality in the automotive market has significantly improved. (Bullish ★) (4) Fed-Bostic: The number of interest rate cuts this year depends on how things unfold, and the details of tariffs will be crucial. He leans towards only one interest rate cut this year, as understanding tariffs takes time. Williams: Policy is somewhat restrictive and in good shape. Recent economic data has been very good, and the key word for the economy is uncertainty. Vice Chair Jefferson: The Fed's policy is in a very good state. We are facing risks on both sides of our dual mandate.

Fundamentals: (1) Supply-side disruptions: Alphamin Resources Corp.'s Bisie tin mine produced 1,290 mt of metal tin from April 15 to May 11, 2025, achieving the expected processing recovery rate. Tin production commenced by processing raw ore stockpiles from the mine, initially from the Mpama North plant, followed by the restart of the Mpama South plant on April 19, 2025. Underground ore blasting and transportation began in the last week of April 2025, while the mine development rate also increased. Since the restart of the mine, the first batch of fully documented and approved tin concentrates for export was shipped by truck on May 9, 2025. (Bullish ★) (2) Demand side: After the Labour Day holiday, some downstream processing enterprises gradually resumed operations, and the demand for low-priced restocking was somewhat released, but high-priced transactions remained sluggish. (Bearish ★)

Spot Market: The transaction prices of spot tin ingots fluctuated around 264,500-266,500 yuan/mt. Smelters showed strong willingness to hold prices, but liquidity was insufficient. Downstream enterprises only maintained just-in-time procurement, and traders faced significant selling pressure.

Nickel

On May 19, the SMM 1# refined nickel price was 123,850-126,150 yuan/mt, with an average price of 125,000 yuan/mt, a decrease of 1,125 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel was 2,000-2,200 yuan/mt, with an average premium of 2,100 yuan/mt, unchanged from the previous trading day. The premiums and discounts quotation range for Russian nickel is 100-300 yuan/mt, with an average premium of 200 yuan/mt, an increase of 50 yuan/mt from the previous trading day.

Futures Market:

The most-traded SHFE nickel contract (NI2506) maintained a fluctuating trend during the daytime session. As of 11:30, the closing price was 124,100 yuan/mt, down 1.27%. In terms of inventory, as of May 16, LME nickel inventory decreased by 3,924 mt to 195,222 mt on a single-day basis, while domestic SHFE inventory decreased by 66 mt to 27,742 mt.

Currently, nickel prices are mainly influenced by "intensified policy disruptions and deepened supply-demand imbalance," maintaining a fluctuating pattern in the short term, with a support level at 122,000 yuan/mt and a resistance level at 128,000 yuan/mt. In the medium and long term, the trend is expected to be weak.