SMM Morning Comment For SHFE Base Metals (Jun 3)

SHANGHAI, Jun 3 (SMM) –

Copper

Futures Market: Overnight, LME copper opened at $9,604.5/mt. After fluctuating considerably to reach an intraday low, it surged straight up to a high of $9,636.5/mt, then fluctuated downward. Near the close, it hit a low of $9,578/mt before finally closing at $9,615/mt, marking a 1.24% increase. Trading volume reached 15,000 lots, and open interest reached 286,000 lots. Overnight, SHFE copper was closed for the holiday.

On the macro side, data showed that the US manufacturing sector contracted for the third consecutive month in May, putting pressure on the US dollar index, which hit a nearly six-week low, providing support for copper prices. Additionally, Trump indicated late last Friday that he plans to raise tariffs on imported steel and aluminum from 25% to 50% starting Wednesday, and hopes that countries will present their best offers for trade negotiations before Wednesday. Currently, US officials are attempting to accelerate negotiations with multiple trading partners before the end of the self-imposed five-week suspension period. Under the pressure of tariff threats, the US dollar is under pressure, providing support for copper prices. On the fundamental side, supply side, last Friday was the last trading day of May, with most enterprises halting trade and fewer shippers, leading to a temporary tightening of spot supply in the market and driving up spot quotes. Demand side, there is still some just-in-time procurement from downstream sectors, but they are forced to accept high premiums, resulting in relatively passive overall procurement behavior and no significant improvement in purchasing sentiment. Price-wise, copper prices are expected to remain supported today.

Aluminum

Futures Market: On Friday, the most-traded SHFE aluminum 2507 contract opened at 20,165 yuan/mt, with a high of 20,180 yuan/mt, a low of 20,070 yuan/mt, and closed at 20,070 yuan/mt. Trading volume was 171,000 lots, and open interest was 196,000 lots. On the same day, LME aluminum opened at $2,450/mt, with a high of $2,456/mt, a low of $2,436/mt, and closed at $2,448.4/mt.

Summary: On the macro side, the escalation of Sino-US trade frictions and the EU's concerns about the US raising aluminum tariffs (to 50%) have increased market uncertainty. However, the rebound in China's manufacturing PMI and the improvement in export indicators in May provided demand support, and economic resilience might limit the decline. Aluminum prices were under short-term pressure and might remain in the doldrums. Fundamentally, domestic aluminum operating capacity remained stable. Notably, the proportion of liquid aluminum alloying increased at some aluminum smelters in north China, reducing casting ingot volumes and affecting arrivals in major consumption areas. Cost side, aluminum production costs rose during the week. As of last Thursday, the domestic aluminum industry's average all-in cost stood at approximately 17,200 yuan/mt, up 258 yuan/mt WoW, mainly due to ore supply disruptions driving alumina prices higher. Aluminum costs increased 1.5% WoW, squeezing smelter margins. Demand side, downstream sectors showed signs of off-season expectations, with PV-related aluminum demand declining and automotive material demand expected to weaken in mid-to-late June. Construction aluminum demand remained lackluster, but aluminum wire and cable operating rates stayed high, supported by orders from State Grid. Macro-wise, the domestic favorable sentiment persisted, while overseas macro uncertainties remained. Fundamentally, stronger-than-expected domestic aluminum ingot inventory drawdowns supported aluminum prices and spot premiums. Some industries already reflected off-season weakness, but the overall decline was milder than expected, indicating resilient demand. Subsequent focus should center on inventory and demand dynamics. With mixed factors, domestic aluminum prices are likely to fluctuate rangebound in the near term.

Lead

Futures Market:

Overnight, LME lead opened at $1,967/mt, and traded in the doldrums during the Asian session. Entering the European session, it fluctuated upward, hitting a high of $1,985/mt before the close, and eventually closed at $1,981/mt, up $17/mt or 0.87%.

On Friday evening, SHFE lead opened at 16,700 yuan/mt, and weakened after the opening, dipping to 16,540 yuan/mt, down 135 yuan/mt or 0.81%.

On the macro front, US manufacturing activity contracted for the fourth consecutive month in May. Affected by factors such as the weakening US dollar, escalating geopolitical conflicts, and the US's fluctuating tariff policies, investors' demand for safe-haven assets increased, leading to a significant rise in gold, silver, and crude oil prices on the evening of June 2. Powell: The government must understand the impact of potentially sharp fluctuations in the US dollar.

Inventory: As of May 30, LME lead inventory decreased by 2,375 mt to 286,175 mt. As of May 29, the total social inventory of lead ingots in five regions tracked by SMM reached 49,400 mt, down about 900 mt from May 22, but up 6,000 mt from May 26.

Today's Lead Price Forecast:

Before the holiday, suppliers were generally active in selling, but downstream procurement demand declined due to the upcoming holiday, and spot transactions were generally conducted at discounts. The absence of lead consumption during the traditional Dragon Boat Festival holiday has become the biggest bearish factor at present, and the risk of inventory buildup for lead ingots will further rise after the holiday. Although there are expectations of a rebound in secondary refined lead supply in June, the supply of scrap materials remains tight, making it difficult to lower scrap battery prices. The widening losses in secondary lead and the inverted pricing between secondary refined lead and primary lead have not eased. After the holiday, it is still necessary to monitor whether the cost support for secondary lead remains effective.

Zinc

Futures market: Overnight, LME zinc opened at $2,638.5/mt. After briefly stabilizing with fluctuations and touching a low of $2,627/mt, it climbed steadily to reach a high of $2,707/mt near the session close, finally settling at $2,693/mt, up $63.5/mt (2.41%). Trading volume rose to 13,705 lots while open interest fell by 536 lots to 213,000 lots. Overnight, SHFE zinc was suspended due to the Dragon Boat Festival holiday in China.

Overnight, LME zinc formed a bullish candlestick with expanding KDJ divergence. The US ISM manufacturing PMI contracted for third consecutive month, the US dollar index weakened, and renewed geopolitical tensions boosted safe-haven demand, lifting LME zinc's price center.

Tin

Futures Market: The most-traded SHFE tin contract (SN2507) remained in the doldrums during the night session of last Friday, with the price center shifting down to around 250,000 yuan/mt, indicating overall weakness.

Macro: (1) Indian Government: Eligible companies can import EVs at a 15% preferential tariff (bullish ★). (2) BYD Auto: New energy vehicle sales in May reached 382,500 units, up from 331,800 units YoY; cumulative sales for the year totaled 1.7634 million units, up from 1.2713 million units YoY, representing a cumulative YoY increase of 38.7% (bullish ★). (3) According to Nikkei: SoftBank, Intel, and other companies will jointly develop high-capacity memory for AI chips (bullish ★). (4) ① European and US trade officials will meet on Wednesday, with the EU reiterating warnings of tariff retaliation. ② Foreign media: Seeking to expedite negotiations, Trump demands countries submit their "best offers" by Wednesday. ③ The Trump administration appeals the US District Court for the District of Columbia's ruling that its tariff policy is "unlawful". ④ Japanese Prime Minister: No intention to make concessions on US tariff issues (neutral).

Fundamentals: (1) Supply-side disruptions: Overall tin ore supply in major production areas such as Yunnan is tightening, with some smelters potentially halting production for maintenance to address raw material shortages (bullish ★). (2) Demand side: After the Labour Day holiday, some downstream processing enterprises gradually resumed operations, releasing some demand for restocking at lower prices, but high-price transactions remained sluggish (bearish ★).

Nickel

Spot Market: Last Friday, the SMM 1# refined nickel price was 120,900-123,750 yuan/mt, with an average price of 122,325 yuan/mt, an increase of 800 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel was 2,500-2,700 yuan/mt, with an average premium of 2,600 yuan/mt, up 100 yuan/mt from the previous trading day. The premiums quotation range for Russian nickel was 100-400 yuan/mt, with an average premium of 250 yuan/mt, unchanged from the previous trading day.

Futures Market: The most-traded SHFE nickel contract (NI2507) opened significantly higher in the night session of last Friday, closing up 1.25% at 121,240 yuan/mt. The fluctuating trend continued in the morning session, with the closing price at 11:30 AM at 120,810 yuan/mt, up 0.89%. In the medium and long term, the global nickel overcapacity issue remains unresolved, with the nickel market under triple pressure of "high supply, weak demand, and tight capital." The short-term fluctuating range is expected between 115,000 yuan/mt and 123,000 yuan/mt.