SMM Morning Comment For SHFE Base Metals (Jun 17)

SHANGHAI, Jun 17 (SMM) –

Copper

Overnight, LME copper opened at $9,678.5/mt, touching a low of $9,664/mt shortly after the opening bell. It then rose slightly before pulling back and fluctuating rangebound. Towards the end of the session, it surged to a high of $9,719.5/mt and eventually closed at $9,695/mt, up 0.49%. Trading volume reached 13,000 lots, and open interest stood at 268,000 lots. Overnight, the most-traded SHFE copper 2507 contract opened at 78,640 yuan/mt, fluctuating rangebound in the early session and touching a low of 78,470 yuan/mt. It then fluctuated upward and surged to a high of 78,730 yuan/mt towards the end of the session, before pulling back slightly and closing at 78,650 yuan/mt, up 0.45%. Trading volume reached 20,000 lots, and open interest stood at 189,000 lots. On the macro side, despite the escalating conflict between Israel and Iran, the US dollar did not exhibit strong safe-haven demand. Meanwhile, the Bank of England, Swiss National Bank, Riksbank, and Norges Bank are all set to announce their interest rate decisions, and the US dollar index still has some downside room, which is bullish for copper prices. On the fundamental side, due to contract rollover yesterday, most suppliers' selling sentiment weakened, and they were unwilling to sell at low prices. There were significant differences in copper cathode prices among various brands during the day, with large fluctuations in premiums for different brands. High-quality copper supply was tight, and premiums for some brands were relatively high. As of Monday, June 16, SMM's copper inventories in major regions across China increased by 2,900 mt from last Friday to 147,700 mt, marking the third consecutive Monday of inventory buildup. Compared with the inventory changes from last Thursday, inventories in most regions across the country increased. In terms of prices, as it is difficult for macro and fundamental factors to form a resonance, the upside room for copper prices is expected to be limited today.

Aluminum

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2507 contract opened at 20,410 yuan/mt, with a high of 20,420 yuan/mt, a low of 20,355 yuan/mt, and closed at 20,385 yuan/mt, down 20 yuan/mt or 0.10% from the previous settlement. LME aluminum opened at $2,497.5/mt on the previous trading day, with a high of $2,521.5/mt, a low of $2,483/mt, and closed at $2,517/mt, up $14/mt or 0.56%.

Summary: On the macro front, the market is closely monitoring the tense situation between Israel and Iran, as well as the US Fed's policy meeting this week, which will conclude on Wednesday. The market generally expects the US Fed to maintain interest rates unchanged. Fundamentals side, the operating capacity of domestic aluminum has remained stable, and the reduction in casting ingot volume has kept domestic aluminum ingot inventory in a state of destocking. Cost side, prices of alumina and auxiliary materials are expected to weaken, leading to reduced cost support for aluminum. Demand side, the sector is facing dual pressures from domestic seasonal weakness and trade uncertainties, and in the short term, the operating rate of aluminum processing enterprises is expected to be under pressure. Overall, the current low inventory and the expectation of a higher proportion of liquid aluminum provide strong support for aluminum prices. However, the off-season pressure on the demand side limits the upside room. Spot aluminum ingots in major consumption areas may soon face a situation of weak supply and demand. In the short term, aluminum prices are expected to hold up well.

Lead

Overnight, LME lead opened at $1,985/mt. During the Asian session, LME lead consolidated, oscillating mainly between $1,985-1,990/mt. Entering the European session, the US dollar index declined, coupled with a drop in LME lead inventory, LME lead surged strongly and breached the $2,000/mt psychological level, even reaching $2,016/mt in the late session, a new high in two and a half months. LME lead eventually closed at $1,992.5/mt, up 0.03%.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,995 yuan/mt. Driven by the gains in LME lead, SHFE lead surged to 17,000 yuan/mt shortly after opening but quickly retraced some of its gains. In the latter half of the trading session, SHFE lead held up well, failing to touch the 17,000 yuan/mt level again, and eventually closed at 16,980 yuan/mt, up 0.35%. Its open interest stood at 41,974 lots, decreasing by 83 lots from the previous trading day.

Yesterday was the delivery day for the SHFE lead 2506 contract. The transfer of lead ingot inventory due to delivery has led to a continued increase in social inventory of lead ingots. Based on the open interest of the SHFE lead 2506 contract, the delivery volume of lead ingots in this round is less than 13,000 mt. The existing inventory in social warehouses is sufficient to meet the delivery needs. Both the delivery volume and the volume of transferred lead ingots are lower than those of last month. A significant reason for this is the widespread production cuts and suspensions at secondary lead enterprises in early June. The rigid demand from downstream enterprises shifted to the primary lead market, leading to a decline in the in-plant inventory of primary lead enterprises. Moreover, spot transactions have shifted from trading at a discount (against the SMM 1# lead average price) last month to trading at a premium this month. Most of the supply from primary lead enterprises has directly flowed into the consumer market, which may support a fluctuating trend of lead prices holding up well. Additionally, it is worth noting that primary lead smelters in north and south-west China entered maintenance this week, and supply is expected to tighten further. However, after the rise in lead prices, the losses of secondary lead enterprises have been mitigated, and some secondary lead enterprises intend to resume production. We need to be vigilant about the impact of the expected release of secondary lead supply on lead prices in the future.

Zinc

Overnight, LME zinc opened at $2,620/mt. In the early session, LME zinc fluctuated around the daily moving average, dipping to a low of $2,610.5/mt before rapidly rising above the daily moving average to a high of $2,665/mt. Entering the night session, LME zinc briefly dipped below the daily moving average but recovered some of the losses towards the end of the session, closing up at $2,660/mt, up $33.5/mt or 1.28%. Trading volume decreased to 124,000 lots, while open interest increased by 41,145 lots to 248,000 lots. Overnight, LME zinc recorded a large bullish candlestick, with the middle band of the Bollinger Bands acting as resistance above. Foreign media reported that Iran was seeking talks with the US and Israel to end hostilities, while Trump also indicated a delay in imposing sanctions on Russia, easing market tensions and pushing LME zinc's center higher.

Overnight, the most-traded SHFE zinc 2507 contract opened higher with a gap at 21,955 yuan/mt. After opening, SHFE zinc immediately reached a high of 21,985 yuan/mt before fluctuating downward below the daily moving average to a low of 21,865 yuan/mt. It then rose above the daily moving average, with its center fluctuating around 21,950 yuan/mt. Towards the end of the session, bulls reduced their positions, causing SHFE zinc to dip slightly, closing up at 21,935 yuan/mt, up 95 yuan/mt or 0.43%. Trading volume decreased to 58,178 lots, while open interest decreased by 4,413 lots to 112,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the 10/60-day moving averages acting as resistance above. Currently, downstream consumption is gradually weakening, while supply-side increases are expected to continue, with demand expected to provide diminishing support for zinc prices. In the short term, zinc prices are expected to remain in the doldrums.

Tin

Futures Market: The most-traded SHFE tin contract (SN2507) pulled back slightly after a small rally during the night session, closing at 264,390 yuan/mt, down 0.05% from the previous day.

Macro: (1) Global NEV sales reached 1.6 million units in May, up 24% YoY. The strong performance in the Chinese market offset the impact of slowing growth in North America. (Bullish ★) (2) Xin Yongfei, Director of the Policy and Economics Research Institute at the China Academy of Information and Communications Technology under the Ministry of Industry and Information Technology (MIIT), stated on June 16 that in recent years, China has continuously strengthened the dominant position of enterprises in innovation, optimized and improved management mechanisms, and is formulating policies to cultivate and expand unicorn enterprises. Support for the high-quality development of specialized and sophisticated small and medium-sized enterprises has been continuously increased. (Bullish ★) (3) Tariffs - ① Trump announced that the UK and the US have signed a trade agreement, and Lutnick will determine the exemption quotas for steel and aluminum tariffs. ② Reports indicate that the EU is prepared to conditionally accept a uniform 10% tariff from the US, with the EU calling the claim speculative. ③ India and the US plan to sign an interim agreement before July 9. ④ The leaders of Japan and the US held a brief meeting during the G7 Summit, with unclear progress in trade negotiations. ⑤ Trump stated that the US-Canada agreement must include tariffs, while Canada expressed that tariffs on Canadian exports should be eliminated.

Fundamentals: (1) Supply-side disruptions: Overall tin ore supply in major production areas such as Yunnan has tightened. As June progresses, some smelters are considering halting production for maintenance or slightly cutting production. (Bullish ★) (2) Demand side: Recently, as tin prices have returned to the 260,000 yuan threshold, orders from most downstream enterprises have decreased, and purchase willingness has weakened.

Spot Market: Trading in the spot market has been sluggish, with weak traditional consumption: Consumer electronics (mobile phones, PCs) have entered the off-season, with orders weakening MoM. Tinplate demand from the food and beverage can industry has been weak, leading to low restocking willingness among enterprises.

Nickel

Spot Market: On June 16, the SMM 1# refined nickel price was 119,400-122,050 yuan/mt, with an average price of 120,725 yuan/mt, a decrease of 775 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, unchanged from the previous trading day. The quotation range for spot premiums and discounts of electrodeposited nickel from major domestic brands was 0-400 yuan/mt.

Futures Market: The most-traded SHFE nickel contract (NI2507) opened lower in the night session last Friday and fluctuated upward, but the price continued to weaken in today's daytime session, dropping to a low of 119,000 yuan/mt. As of 11:30, SHFE nickel closed at 119,690 yuan/mt, a decrease of 340 yuan/mt or 0.28% from the previous trading day.

In the short term, nickel prices are expected to fluctuate rangebound between 118,000-123,000 yuan/mt. If Indonesia tightens its nickel ore policies, it may trigger a phased rebound. However, in the medium and long term, the surplus pressure is difficult to resolve, and coupled with the lack of incremental demand, the upside room for nickel prices is limited.