SMM Morning Comment For SHFE Base Metals (May 26)

SHANGHAI, May 26 (SMM) –

Copper

Overnight, LME copper opened at $9,570.5/mt. After initial fluctuations, it trended lower, hitting a low of $9,478.0/mt during the session. It then fluctuated upward, reaching a high of $9,630.0/mt near the close, and ultimately closed at $9,614.0/mt, up 0.99%. Trading volume was 19,904 lots, and open interest was 287,484 lots. Overnight, the SHFE copper 2506 contract opened lower at 77,680 yuan/mt. After initial fluctuations, it fluctuated upward, reaching a high of 78,480 yuan/mt during the session, and ultimately closed at 78,390 yuan/mt, up 0.72%. Trading volume was 29,488 lots, and open interest was 151,158 lots, with a daily increase in open interest of -1,247 lots and a daily change rate in open interest of -0.82%. On the macro side, after the US indicated on Friday that it would impose a 50% tariff on goods from the EU, copper prices fell. However, as the US dollar index dropped to its lowest level in more than three weeks, copper prices rebounded and trended higher. Meanwhile, Zijin Mining announced on the evening of May 23 that there had been multiple mine tremors at the Kakula mine section of the Kamoa-Kakula copper mine owned by the company in recent days. Following a decision by the management of Kamoa Copper, underground operations in the area have been suspended. Concerns about the copper mine have also boosted copper prices. In addition, Trump has now restored the 90-day window for trade negotiations with the EU. On the fundamental side, the availability of marketable supplies has once again tightened, with signs of a widening price spread between futures contracts and an upward movement in the premium. Downstream consumption remains sluggish amid high copper prices and high premiums. Overall, with the US dollar index operating weakly, copper prices are expected to find support today.

Aluminum

Futures Market: On last Friday's night session, the most-traded SHFE aluminum 2507 contract opened at 20,125 yuan/mt, with a high of 20,175 yuan/mt, a low of 20,080 yuan/mt, and closed at 20,175 yuan/mt, up 20 yuan/mt or 0.10% from the previous close. LME aluminum opened at $2,460.5/mt on the previous trading day, with a high of $2,473/mt, a low of $2,440/mt, and closed at $2,466/mt, up $9.5/mt or 0.39%.

Summary: Macro-wise, following the China-US joint announcement, market optimism surged as the US made progress in tariff negotiations with major economies, marginally strengthening expectations of trade war de-escalation and improving macro sentiment. Fundamentals side, short-term supply-side changes remain relatively small. Cost side, the specific impact of Guinea’s incident on bauxite supply awaits assessment, though it may temporarily bolster alumina cost support sentiment-wise. Demand side faces dual pressures of domestic seasonal weakness and trade uncertainty, with short-term aluminum processing enterprises’ operating rates continuing to decline under pressure. Subsequent attention should be on whether downstream export orders genuinely improve to offset domestic demand softening. Overall, current low inventory supports aluminum prices, but the absence of macro catalysts to further drive prices and off-season demand pressure limit upside room. Spot aluminum ingot in mainstream consumption areas will likely face weak supply and demand, with short-term prices fluctuating rangebound. Monitor domestic and overseas demand performance, month-end inventory trends, and bauxite supply disruptions.

Lead

Last Friday, LME lead opened at $1,971.5/mt. During the Asian session, LME lead moved sideways, basically consolidating within the range of $1,985-1,990/mt. However, as the market entered the European session, the US dollar strengthened amid volatility, exerting downward pressure on non-ferrous metals. Consequently, LME lead fell to $1,975/mt. Later, supported by destocking of lead ingots, LME lead gradually recovered its losses and approached the $2,000/mt threshold, eventually closing at $1,994/mt, up 1.53%. Additionally, today is a bank holiday in the UK, and the LME lead market will be closed for the day.

Last Friday, the most-traded SHFE lead 2507 contract opened at 16,835 yuan/mt. With the reduction in lead ingot inventory, SHFE lead surged to 16,870 yuan/mt in the early session. However, due to the lingering weakness during the off-season, the upward momentum of SHFE lead was insufficient. During the latter half of the trading session, it oscillated mainly within the range of 16,800-16,850 yuan/mt, eventually closing at 16,850 yuan/mt, up 0.45%. Its open interest stood at 46,061 lots, a decrease of 1,318 lots from the previous trading day.

Zinc

On Friday, LME zinc opened at $2,705.5/mt. In the early session, LME zinc fluctuated upward along the daily moving average, reaching a high of $2,721.5/mt during European trading hours. Subsequently, as bulls reduced their positions, LME zinc fluctuated downward, hitting a low of $2,670.5/mt during the night session before stabilizing and rebounding. LME zinc consolidated near the daily moving average, closing up at $2,712.5/mt, up $8/mt or 0.3%. Trading volume increased to 8,815 lots, while open interest remained unchanged at 212,000 lots. On Friday, the most-traded SHFE zinc 2507 contract opened at 22,155 yuan/mt. In the early session, SHFE zinc briefly declined to a low of 22,085 yuan/mt before bears reduced their positions, causing SHFE zinc to fluctuate upward, reaching a high of 22,300 yuan/mt. It then traded sideways, closing up at 22,280 yuan/mt, up 65 yuan/mt or 0.29%. Trading volume decreased to 67,614 lots, while open interest fell by 1,346 lots to 113,000 lots.

Zinc price outlook: Last Friday, LME zinc recorded a small bullish candlestick with a long lower shadow, retracing to the 5/10-day moving average. Trump once again threatened to escalate the trade war, proposing to impose a 50% tariff on the EU starting from June 1. The US dollar index declined, and non-ferrous metals generally rose. Meanwhile, LME inventory continued to record a decline, and LME zinc fluctuated upward. Last Friday, SHFE zinc recorded a bullish candlestick, with the 10-day moving average acting as resistance above. Trump once again escalated the trade war, and the US dollar index weakened, with non-ferrous metals generally rising. On the fundamental side, the expectation of a zinc ingot supply surplus still exists, but consumption remains resilient. SHFE zinc is expected to continue fluctuating.

Tin

On the international macro front, the US GDP contracted by 0.3% QoQ in Q1 2025, with core PCE inflation rising to 3.5%, consumer confidence falling to a record low, and the manufacturing PMI pulling back to 48.7, indicating intensified downward pressure on the economy. The US Fed kept interest rates unchanged for the third consecutive time, emphasizing 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. The domestic tin mine market generally exhibited a pattern of weak supply and demand. In terms of supply, refined tin production in May is expected to decline MoM, but the spot tin market will still 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. It is expected to enter the smelting process in June, making it difficult to alleviate the tight supply situation in the short term. On the demand side, no significant improvement has been observed so far. 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%. TCs were at historical lows, putting pressure on smelting profits. Looking ahead, it is expected that tin prices will continue to fluctuate rangebound before any significant macro favourable or unfavourable factors emerge. Investors need to closely monitor the progress of China-US economic and trade talks, the trend of the US dollar, and changes in domestic policies, and operate cautiously.