SMM Morning Comment For SHFE Base Metals (Jun 5)

SHANGHAI, Jun 5 (SMM) –

Copper

Overnight, LME copper opened at $9,640/mt, touching a low of $9,603.5/mt shortly after the opening bell. It then fluctuated considerably upward, reaching a high of $9,660/mt near the close, and eventually settled at $9,649/mt, up 0.11%. Trading volume reached 14,000 lots, and open interest stood at 284,000 lots. Overnight, the most-traded SHFE copper 2507 contract opened at 78,050 yuan/mt, fluctuating upward in the early session to reach a high of 78,220 yuan/mt during the day. It then fluctuated downward, touching a low of 77,960 yuan/mt, before rebounding slightly near the close to settle at 78,140 yuan/mt, down 0.08%. Trading volume reached 26,000 lots, and open interest stood at 191,000 lots. On the macro front, the ADP National Employment Report released on Wednesday showed that private sector employment in the US increased by only 37,000 jobs in May, far below expectations. Following the data release, Trump once again called on Fed Chairman Powell to lower interest rates. The US dollar index fell, returning to a six-week low, which was bullish for copper prices. On the fundamental side, from the supply perspective, the availability of mainstream high-quality copper was extremely tight. Suppliers, due to the scarcity of goods, had extremely low willingness to sell at low prices. Looking ahead to today, with the guidance of the narrowing price spread between futures contracts, it is expected that there is still downside room for premiums. Attention should be paid to whether parity will be broken. In terms of prices, with ongoing tariff concerns, it is expected that there will be limited upside potential for copper prices today.

Aluminum

Futures Market: Last night, the most-traded SHFE aluminum 2507 contract opened at 20,030 yuan/mt, with a high of 20,125 yuan/mt, a low of 20,025 yuan/mt, and closed at 20,110 yuan/mt. Trading volume was 43,000 lots, and open interest was 189,000 lots. Yesterday, LME aluminum opened at $2,485/mt, with a high of $2,490/mt, a low of $2,483/mt, and closed at $2,489/mt.

The US Fed's Beige Book revealed the current situation of slowing economic activity and excessive inflationary pressures in the US. Policy uncertainty has simultaneously exacerbated market risk-averse sentiment. Enterprises, influenced by the economic environment, may choose to pass on costs, potentially suppressing end-use demand. Coupled with the risk of international trade frictions, there is a high probability of short-term pressure and volatility in aluminum prices. On the fundamentals side, the operating capacity of domestic aluminum smelters remained stable. It is worth noting that the proportion of liquid aluminum alloying increased in some aluminum smelters in north China, leading to a decrease in casting ingot volumes and affecting the arrival of goods in major consumption areas. On the demand side, some downstream sectors are showing expectations of a slowdown during the off-season. The demand for aluminum in the PV sector has decreased, and the demand for automotive materials is expected to weaken in mid-to-late June. The demand for aluminum in construction remains lukewarm, but currently, due to the demand from State Grid orders, the operating rate of aluminum wire and cable remains high. In terms of inventory, as the Dragon Boat Festival holiday approaches, some aluminum processing enterprises have slightly stockpiled based on their orders on hand. Overall, short-term market sentiment may be suppressed by tariff impacts, weighing on aluminum prices. Meanwhile, the unexpected drawdown in domestic aluminum ingot inventory provides support for aluminum prices and spot premiums. Currently, some industries are already showing expectations of a slowdown during the off-season, but the overall decline is better than expected, and demand resilience still exists. It is expected that SHFE aluminum will maintain a fluctuating trend in the short term, with relatively stable support below.

Lead

Overnight, LME lead opened at $1,985/mt. During the Asian session, it edged higher. Entering the European session, it initially dipped before rallying to a high of $1,994.5/mt. It then hit a low of $1,979.5/mt before the close and finally settled at $1,984/mt, down $2/mt or 0.1%.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,680 yuan/mt. It consolidated near the 16,700 yuan/mt level under pressure in early trading before rallying to a high of 16,765 yuan/mt. It then underwent a slight correction and finally closed at 16,725 yuan/mt, up 90 yuan/mt or 0.54%.

On the inventory front, according to SMM, as of June 3, the total social inventory of lead ingots in five regions tracked by SMM reached 49,900 mt, an increase of 6,500 mt from May 26 and over 400 mt from May 29. As of June 4, LME lead inventory decreased by 1,600 mt to 281,550 mt.

Recently, domestic lead prices have rebounded after testing bottom support but continue to exhibit a weak oscillating trend. Downstream enterprises are mostly observing with limited immediate restocking. On the raw material front, primary lead smelters have not yet entered their routine maintenance period from June to August in early June. Coupled with a decline in imported ore supply, the supply-demand gap for raw materials such as lead concentrates has widened, and quotes for TCs of imported lead concentrates in June have shown signs of another decline. In terms of secondary refined lead, although there was a slight recovery in secondary refined lead production in June MoM from May, if market conditions continue to be sluggish, there may be new enterprises halting production for maintenance or enterprises postponing their production resumption plans. The impact of raw material procurement prices and profit/loss situations of smelters on production enthusiasm will still need to be considered in the future.

Zinc

Overnight, LME zinc opened at $2,706/mt. After opening, LME zinc rose steadily, hitting a high of $2,730/mt during the midday session, before pulling back from highs and declining all the way. It touched a low of $2,692/mt near the end of the session, eventually closing down at $2,704/mt, down $7.5/mt or 0.28%. Trading volume decreased to 9,128 lots, while open interest fell by 521 lots to 213,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the 10-day moving average providing support below. Although the US ADP employment data fell short of expectations and the US dollar index declined, the market continued to focus on trade negotiations, with persistent concerns about tariffs. As a result, LME zinc maintained a fluctuating trend.

Overnight, the most-traded SHFE zinc 2507 contract opened at 22,380 yuan/mt. In the early session, SHFE zinc weakened slightly, touching a low of 22,285 yuan/mt, before slowly rising and oscillating above the daily average line. It hit a high of 22,385 yuan/mt near the end of the session, eventually closing down at 22,380 yuan/mt, down 40 yuan/mt or 0.18%. Trading volume decreased to 63,797 lots, while open interest fell by 3,425 lots to 121,000 lots. Overnight, SHFE zinc recorded a doji, with the 40-day moving average providing support below. Macro factors continued to weigh on zinc prices. Coupled with weak downstream consumption during the off-season, the fundamentals provided insufficient support for zinc prices, and SHFE zinc continued to be in the doldrums.

Tin

Futures Market: The most-traded SHFE tin contract (SN2507) edged higher during the night session, closing at 258,940 yuan/mt, up 1.49% from the previous day.

Macro: (1) GlobalFoundries, a US semiconductor wafer foundry company, announced plans to invest $16 billion to enhance its semiconductor manufacturing and advanced packaging capabilities at its facilities in New York and Vermont. (Bullish ★) (2) China South Industries Group Corporation (CSGC) is undergoing a spin-off, with its automotive business being separated into an independent central state-owned enterprise. (Bullish ★) (3) Jean-Marc Chery, CEO of STMicroelectronics, stated on Wednesday that the French-Italian chipmaker has seen signs of an upturn, with market demand expected to increase, which will boost its performance in the coming quarters. (Bullish ★) (4) Tariffs - ① Reports suggest that a US-Canada agreement may be reached next week. Canadian Prime Minister: If negotiations fail, Canada is prepared to take retaliatory measures against the US. ② EU trade official: Negotiations with the US are progressing steadily in the right direction. ③ UK Prime Minister: Very confident that US tariffs can be reduced in a very short time. ④ US Commerce Secretary: Analysis and formulation of tariff standards for aircraft parts will be completed by month-end; there will be no mutual tariff and barrier reductions with Vietnam. ⑤ Mexico will announce measures next week in response to US steel and aluminum tariffs. (Neutral)

Fundamentals: (1) Supply-side disruptions: Overall tin ore supply in major producing regions such as Yunnan is tightening. As June begins, some smelters are considering halting production for maintenance or slightly cutting production. (Bullish ★) (2) Demand side: Recently, as tin prices hit a bottom of 250,000 yuan/mt, orders from most downstream enterprises have picked up, and purchase willingness has increased. (Bullish ★)

Spot Market: As prices climb, downstream enterprises' willingness to restock on dips has decreased. Some end-users are making just-in-time procurement. Traders reported that yesterday's transactions were weaker than at the beginning of the week, and some traders' inventories have been cleared.

Nickel

Spot Market: On June 4, the SMM 1# refined nickel price was 122,100-124,750 yuan/mt, with an average price of 123,425 yuan/mt, up 575 yuan/mt from the previous trading day. The quotation range for spot premiums of Jinchuan #1 refined nickel was 2,400-2,600 yuan/mt, with an average premium of 2,500 yuan/mt, down 50 yuan/mt from the previous trading day. The quotation range for premiums of Russian refined nickel was 100-600 yuan/mt, with an average premium of 350 yuan/mt, up 50 yuan/mt from the previous trading day.

Futures Market: The most-traded SHFE nickel contract (NI2507) opened lower and closed higher in the night session, ending at 121,860 yuan/mt, up slightly by 0.25%. It continued to strengthen during the day session, closing at 122,700 yuan/mt by 11:30, up 0.94%.

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 oscillation range is expected to have a bottom at 118,000 yuan/mt and a ceiling at 123,000 yuan/mt.