SMM Morning Comment For SHFE Base Metals (May 23)

SHANGHAI, May 23 (SMM) –
Copper
Overnight, LME copper opened at $9,463.5/mt, dipping to a low of $9,433.5/mt shortly after the opening bell. It then fluctuated upward, reaching a high of $9,519.5/mt near the close, ultimately closing at $9,519.5/mt, up 0.34%. Trading volume reached 14,000 lots, and open interest stood at 287,000 lots. Overnight, the most-traded SHFE copper 2506 contract opened at 77,730 yuan/mt, dipping slightly to a low of 77,600 yuan/mt shortly after the opening bell. It then fluctuated upward, reaching a high of 77,910 yuan/mt near the close, ultimately closing at 77,820 yuan/mt, down 0.12%. Trading volume reached 20,000 lots, and open interest stood at 153,000 lots. On the macro front, Trump's tax reform bill narrowly passed the House of Representatives and was sent to the Senate for review. US Treasury yields pulled back from recent highs, and the US dollar rose on Thursday after three consecutive days of declines, with LME copper dropping slightly. On the fundamental side, from the supply side, warrant liquidation has been significant, but warehouse inventories have not decreased as expected. As of Thursday, May 22, SMM copper inventories in major regions across China increased slightly by 700 mt from Monday to 139,900 mt, up 7,900 mt from last Thursday, marking the second consecutive week of inventory buildup, though the buildup was less pronounced than the previous week. On the demand side, copper prices fell yesterday, leading to better trading at lower prices. Currently, low-priced supplies have been largely purchased, and it is expected that the center of the premium will struggle to rebound today. In terms of prices, with no more positive news in the market, it is expected that the upside potential for copper prices will be limited today.
Aluminum
Futures Market: Overnight, the most-traded SHFE aluminum 2507 contract opened at 20,150 yuan/mt, with a high of 20,175 yuan/mt, a low of 20,115 yuan/mt, and closed at 20,160 yuan/mt, down 50 yuan/mt or 0.25% from the previous close. On Thursday, LME aluminum opened at $2,460.5/mt, with a high of $2,462/mt, a low of $2,459.5/mt, and closed at $2,460.5/mt, up $4/mt or 0.16%.
Summary: On the macro front, the US dollar index rose 0.33% overnight, closing at 99.94. The US House of Representatives passed President Trump's large-scale tax and spending cut bill. On Thursday, US Fed Governor Christopher Waller stated that if the Trump administration maintains tariffs on US trading partners at around 10%, the Fed may begin cutting interest rates in H2 2025. On the fundamentals side, short-term supply-side changes are relatively small. On the cost side, the specific impact of the Guinea incident on local bauxite supply remains to be assessed, but it may provide emotional support to alumina costs in the short term. The demand side faces dual pressures of domestic seasonal weakness and trade uncertainty. In the short term, the operating rate of aluminum processing enterprises continues to decline under pressure. Subsequent attention will be on whether downstream export orders can truly improve and offset the weakening expectations of domestic demand. Overall, current low inventory provides support for aluminum prices, but the lack of macro-driven positive factors to further push prices, coupled with off-season pressure on the demand side, limits upside room. Spot aluminum ingot in mainstream consumption areas will face a weak supply and demand situation. In the short term, aluminum prices are expected to maintain rangebound consolidation, with focus on domestic and overseas demand performance, inventory trends by the end of May, and bauxite supply disruptions.
Lead
Overnight, LME lead opened at $1,975/mt. After touching a high of $1,977/mt in the Asian session, it plunged, reaching a low of $1,947.5/mt in the European session. It then rallied to close at $1,964/mt, down 0.73%, with a small bearish candlestick featuring a long lower shadow.
Overnight, the most-traded SHFE lead 2507 contract opened at 16,685 yuan/mt. After briefly touching a low of 16,655 yuan/mt in the early session, it fluctuated rangebound, reaching a high of 16,715 yuan/mt, and eventually closed at 16,695 yuan/mt, down 0.51%.
After the delivery of SHFE lead last week, the supply of primary lead re-entered the market this week. Some downstream enterprises prioritized local procurement, leading to a significant decrease in social inventory in the Jiangsu, Zhejiang, and Tianjin regions. Meanwhile, with the advancement of new capacity and production resumptions in secondary lead, the expected increase in supply has risen. However, the off-season trend in the lead-acid battery market remains unchanged. It is anticipated that after the expected increase in supply materializes, the decline in social inventory of lead ingots may slow down. Due to the significant drop in procurement quotes for secondary lead raw materials, the cost support for lead prices has weakened, and short-term bearish sentiment is strong.

Zinc
Overnight, LME zinc opened at $2,683/mt. In the early session, LME zinc fluctuated considerably along the daily average line, dipping to a low of $2,669/mt during European trading hours. Entering the night session, LME zinc quickly rose above the daily average line, hitting a high of $2,707.5/mt. Subsequently, the price center of LME zinc fluctuated rangebound around $2,700/mt, eventually closing up at $2,704.5/mt, a gain of $20/mt or 0.75%. Trading volume decreased to 80,249 lots, while open interest fell by 866 lots to 212,000 lots. Overnight, LME zinc recorded a bullish candlestick. The 60-day moving average above exerted pressure, while the 20-day moving average below provided support. Overnight, LME zinc inventory decreased by 1,650 mt to 156,225 mt, a decline of 1.05%. Trump's tax reform bill narrowly passed the House of Representatives. Influenced by the expected increase in the fiscal deficit outlined in the bill, market concerns gradually emerged. Meanwhile, PMI data that exceeded expectations somewhat restored market sentiment, causing the price center of LME zinc to rise.
Overnight, the most-traded SHFE zinc 2507 contract opened at 22,295 yuan/mt. In the early session, with bulls increasing their positions, SHFE zinc quickly rose, hitting a high of 22,375 yuan/mt. Subsequently, SHFE zinc plunged below the daily average line, dipping to a low of 22,250 yuan/mt. SHFE zinc then slightly rose, eventually closing up at 22,300 yuan/mt, a gain of 55 yuan/mt or 0.25%. Trading volume decreased to 52,040 lots, while open interest increased by 1,141 lots to 109,000 lots. Overnight, SHFE zinc recorded a bullish candlestick. The 40/60-day moving averages above exerted pressure, while the middle Bollinger Band below provided support. On the fundamental side, the entry of Russia's OZ mine into China continues to fuel expectations of a loose supply side. Downstream consumption sectors have shown mixed performances, with only a small-scale recovery observed in export orders. It is expected that SHFE zinc will continue to fluctuate in the short term.

Tin
Futures Market: The most-traded SHFE tin contract (SN2506) remained in a low-level sideways trend during the night session, continuing its downward momentum. The price slid to approximately 264,000 yuan/mt, a slight decrease of 0.59 from the previous trading day. Open interest decreased by 1,463 lots to 22,400 lots.
Macro: (1) China Passenger Car Association (CPCA): It is forecasted that retail sales of narrowly defined passenger vehicles in May will reach 1.85 million units, with 980,000 units being new energy vehicles (bullish ★). (2) Xiaomi Auto: Cumulative deliveries in 2025 reached 258,000 units, with over 28,000 units delivered in April (bullish ★). (3) TSMC and other producers have submitted recommendations to the US Department of Commerce, proposing exemptions for semiconductor-related tariffs (bullish ★). (4) Tariffs - ① Japan's Minister for Economic Revitalization: Will visit the US from Friday to Sunday this week for tariff negotiations. ② White House advisor Milan: Currently, there is no secret work being conducted on negotiations related to currency issues (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 the demand for restocking at lower prices was somewhat released. However, transactions at higher prices remained sluggish (bearish ★).
Spot Market: Despite the decline in SHFE tin prices, the overall high prices suppressed the willingness to restock. Downstream solder, electronics, and home appliance enterprises, constrained by the high prices, only maintained just-in-time procurement. Traders reported that most transactions were concentrated in the low price range of 265,000-266,000 yuan/mt, with a strong wait-and-see sentiment prevailing in the market.