SMM Morning Comment For SHFE Base Metals (May 22)

SHANGHAI, May 22 (SMM) –

Copper

Overnight, LME copper opened at $9,542.5/mt, rose initially and peaked at $9,567/mt, then fluctuated downward throughout the session, dipping to a low of $9,487/mt near the close, and finally closed at $9,487/mt, down 0.71%. Trading volume reached 14,000 lots, and open interest stood at 285,000 lots. Overnight, the most-traded SHFE copper 2506 contract opened at and peaked at 78,010 yuan/mt, maintained a narrow rangebound fluctuation during the session, dipped slightly near the close to a low of 77,770 yuan/mt, and finally closed at 77,770 yuan/mt, down 0.41%. Trading volume reached 21,000 lots, and open interest stood at 159,000 lots. On the macro front, the US and Iran have held multiple rounds of talks on Iran's nuclear program this year, with Trump previously restarting actions to tighten sanctions on Iran's crude oil exports. Sources familiar with the matter said that Israel is preparing to swiftly strike Iran's nuclear facilities in the event of a breakdown in US-Iran negotiations. Affected by this, crude oil prices first rose and then fell, exerting downward pressure on copper prices. On the fundamental side, from the supply side, some smelters did not directly ship goods, with the market dominated by import traders and warrant-holding traders offering goods at low prices, and the sentiment for shipping goods weakened. From the demand side, as spot premiums fell, the downstream procurement sentiment index rose, and buyers actively engaged in bargain down purchasing prices. In terms of prices, with no more bearish news currently, it is expected that there will be limited downside space for copper prices today.

Aluminum

Futures Market: Overnight, the most-traded SHFE aluminum 2507 contract opened at 20,155 yuan/mt, with a high of 20,175 yuan/mt, a low of 20,100 yuan/mt, and closed at 20,135 yuan/mt, down 55 yuan/mt or 0.27% from the previous close. On Wednesday, LME aluminum opened at $2,481.5/mt, with a high of $2,497.5/mt, a low of $2,464/mt, and closed at $2,475.5/mt, down $5.5/mt or 0.22%.

Summary: On the macro side, the US dollar index extended its decline from the previous two trading days overnight, weighed down by controversies over US tax cuts and spending bills, as well as weak demand for the 20-year US Treasury bond auction. Market concerns about the increase in US debt and a weakening economic outlook intensified, leading to a rise in market risk aversion. On the fundamentals side, there were relatively small changes in the short-term supply side. On the cost side, the specific impact of the Guinea incident on local bauxite supply remains to be assessed, and it may provide short-term sentiment-based support to the alumina cost side. The demand side is facing dual pressures from domestic seasonal weakness and trade uncertainties, and the operating rate of aluminum processing enterprises is expected to decline under pressure in the short term. Overall, the current low inventory provides support for aluminum prices, but macro headwinds and off-season pressure on the demand side limit the upside room. In the short term, aluminum prices are expected to remain volatile, with attention to be paid to the performance of domestic and overseas demand as well as the supply of bauxite.

Lead

Overnight, LME lead opened at $1,984/mt, fluctuating rangebound during the Asian session. It briefly touched a high of $1,994/mt in the European session before bulls reduced their positions, causing LME lead to dive to a low of $1,955/mt. It partially recovered towards the close, ending at $1,978.5/mt, down 0.4%.

Overnight, the most-traded SHFE lead 2507 contract opened at a high of 16,895 yuan/mt. After opening, bears increased their positions, and SHFE lead fluctuated downward, reaching a low of 16,820 yuan/mt. It closed at 16,835 yuan/mt, down 0.33%.

Smelters are facing tight raw material supplies, with lead concentrate prices showing an upward trend and scrap battery procurement prices remaining high. Smelters are under significant operational pressure, with some enterprises significantly lowering their scrap battery procurement quotes yesterday. Although some recyclers are selling off due to fear of price declines, arrivals remain limited. Meanwhile, downstream lead-acid battery orders are poor, and the willingness to procure lead ingots is weak. The increasing uncertainty in the international economic environment, coupled with the drag from spot market performance, may keep lead prices trapped within a range.

Zinc

Overnight, LME zinc opened at $2,724/mt. Early in the session, LME zinc edged lower, but recovered losses and climbed to a high of $2,737/mt near the European trading hours. However, as bulls reduced their positions, LME zinc plunged below the daily moving average to a low of $2,680/mt, eventually closing at $2,684.5/mt, down $40/mt or 1.47%. Trading volume decreased to 80,411 lots, while open interest fell by 4,611 lots to 213,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the 60-day moving average acting as resistance above and the 20-day moving average providing support below. Weak demand at the 20-year US Treasury bond auction led to a relatively dismal outcome, heightening market concerns about the economy. Meanwhile, overseas inventories increased, causing LME zinc's center to decline amid the resonance of macro and fundamental factors.

Overnight, the most-traded SHFE zinc 2506 contract opened at 22,515 yuan/mt. Early in the session, SHFE zinc briefly climbed to 22,520 yuan/mt, but then edged lower below the daily moving average as bulls reduced their positions. Subsequently, a tug-of-war between bulls and bears ensued, with SHFE zinc's center fluctuating around 22,410 yuan/mt. It eventually closed lower at 22,415 yuan/mt, down 165 yuan/mt or 0.73%. Trading volume decreased to 38,011 lots, while open interest fell by 2,641 lots to 64,534 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the 40/60-day moving averages acting as resistance above and the lower Bollinger Band providing support below. Recently, export orders in some downstream sectors have shown signs of improvement, driving a slight recovery in consumption. Meanwhile, amid expectations of easing supply, SHFE zinc is expected to maintain a fluctuating trend.

Tin

Futures Market: The most-traded SHFE tin contract (SN2506) opened lower and continued to decline during the night session, sliding to around 266,000 yuan/mt, a slight drop from the previous trading day.

Macro: (1) Zheng Shanjie, Director of the National Development and Reform Commission (NDRC): China's economy has a solid foundation, strong resilience, and great potential. The fundamental trend of long-term positive growth remains unchanged and will not change. (Bullish ★) (2) The European Commission plans to impose a 2-euro tax on small parcels entering the EU. The Ministry of Foreign Affairs responded, hoping that the EU will adhere to its commitment to openness. (Bullish ★) (3) China Passenger Car Association (CPCA): From May 1 to 18, nationwide passenger vehicle retail sales increased by 12% YoY and 18% MoM. (Bullish ★) (4) Tariffs - ① It is reported that the EU plans to propose a trade initiative with the US to advance negotiations. ② Nike will raise prices in the US, and Amazon's CEO stated that tariffs have not reduced demand. ③ Lutnick: He hopes to reach trade agreements with most major partners before the tariff suspension expires this summer. (Neutral)

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. Blasting and transportation of underground ore began in the last week of April 2025, with the mine development rate also increasing. 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 there was some release of demand for restocking at lower prices, but high-price transactions remained sluggish. (Bearish ★)

Spot Market: Driven by the strong rally in the most-traded SHFE tin contract yesterday, spot tin ingot prices surged significantly. However, high prices significantly suppressed actual transactions, intensifying the tug-of-war between sellers and buyers. The market exhibited a pattern of "high prices with little trading," with transactions mainly consisting of small orders to meet immediate needs.