SMM Morning Comment For SHFE Base Metals (Jun 23)

SHANGHAI, Jun 23 (SMM) –
Copper
On Friday evening, LME copper opened at $9,628.5/mt, surging to a high of $9,700/mt in the early session, then fluctuating downward, hitting a low of $9,621.5/mt during the session, and experiencing a slight correction towards the end, ultimately closing at $9,660.5/mt, up 0.43%. Trading volume was 16,794 lots, and open interest was 288,717 lots. The overall trend was a surge followed by a pullback, then a fluctuation upward. On Friday evening, the SHFE copper 2507 contract opened at 78,480 yuan/mt, hitting a high of 78,580 yuan/mt in the early session, fluctuating downward to a low of 78,260 yuan/mt during the session, and ultimately closing at 78,380 yuan/mt after some fluctuations towards the end, up 0.26%. Trading volume was 18,246 lots, and open interest was 162,379 lots. The overall trend was a high hit followed by a fluctuation downward. On the macro front, Trump: The US military conducted air strikes on three major Iranian nuclear facilities, including Fordow, and Iran must immediately agree to end this war. Iranian Foreign Minister: Even if nuclear facilities are destroyed, they can be rebuilt, and technical knowledge "cannot be bombed away." The Iranian parliament favors closing the Strait of Hormuz, and the Houthi rebels have stated they will resume attacks on US ships. Meanwhile, Trump questioned why the Iranian regime cannot be overthrown. Due to the uncertainty of the Middle East war, copper prices opened high and closed higher. On the fundamental side, the price spread between futures contracts widened, and warrants flowed out. As the semi-annual settlement approaches, it is expected that under the demand for enterprises to ship goods and receive payments, the premium will further decline. Overall, amidst the uncertainty of the global economic outlook, it is expected that there will still be support at the bottom of copper prices today.
Aluminum
Futures Market: On Friday, the most-traded SHFE aluminum 2508 contract opened at 20,425 yuan/mt, with a high of 20,465 yuan/mt, a low of 20,400 yuan/mt, and closed at 20,425 yuan/mt. Trading volume was 56,000 lots, and open interest was 248,000 lots. On Friday, LME aluminum opened at $2,525/mt, with a high of $2,564/mt, a low of $2,513/mt, and closed at $2,561.5/mt. Trading volume was 13,000 lots, and open interest was 3,000 lots.
Summary: On the macro front, there was a clear divergence in statements from US Fed officials regarding interest rate cuts, with geopolitical conflicts elevating market bullish sentiment. On the fundamental front, domestic primary aluminum operating capacity remained stable, with the proportion of liquid aluminum maintaining high levels, and market casting ingot volumes remaining tight. SMM learned that individual aluminum plants slightly increased casting ingot volumes this week, but it remains difficult to change the overall tight market casting ingot supply. On the demand side, overall, most downstream sectors are in the traditional off-season, with significant production cuts feedback in the downstream sector in central China, weakening local spot transactions, and persistent large discounts in market transaction prices. From the perspective of downstream demand sectors, the weakening off-season demand in the PV and home appliance sectors cannot be ignored, with a significant decline in the operating rates of related sectors. The wire and cable sector experienced a decline in operating rates due to the completion of the previous delivery period and high aluminum prices. In terms of inventory, the destocking pace has slowed, with low inventory still providing support to the futures market, but spot premiums and discounts have gradually pulled back. Overall, the domestic favorable macro environment remains unchanged. On the fundamental side, the low inventory of domestic aluminum ingots provides support for aluminum prices. However, the weakening of downstream demand during the off-season is evident, and spot premiums/discounts may fall back from highs. Going forward, it is necessary to focus on changes in inventory and demand.
Lead
On Friday evening, LME lead opened at $1,991.5/mt. During the Asian session, it fluctuated downward. Entering the European session, it continued to decline, hitting a bottom of $1,978/mt before fluctuating upward, reaching a high of $1,995.5/mt, and finally closing at $1,995/mt, up $6.5/mt or 0.33%.

On Friday evening, the most-traded SHFE lead 2507 contract gapped up and opened at 16,855 yuan/mt. In the early session, it consolidated horizontally around the daily moving average before rising to a high of 16,885 yuan/mt and eventually closing at 16,875 yuan/mt, up 20 yuan/mt or 0.12%.
The escalation of the Israel-Iran conflict in macro aspects has increased its impact on the global energy market, indirectly disturbing non-ferrous metals. In late June, maintenance activities at primary lead enterprises increased, and domestic lead concentrate TCs fell again. Raw material supply constraints limited refined lead production, easing the supply pressure of lead ingots. As the mid-year approaches, some lead-acid battery enterprises have postponed their raw material procurement needs due to the requirement for mid-year account closing and settlement. Additionally, some downstream enterprises are cautiously bearish about the lead price, which is fluctuating at highs, leading to a slight decline in their enthusiasm for procurement and inventory preparation. In the short term, both supply and demand in the lead market are weak. Some downstream enterprises still have expectations for production resumption in July, and the lead price may continue to fluctuate at highs in the short term.
Zinc
Last Friday, LME zinc opened at $2,646.5/mt. Early in the session, LME zinc briefly rose to a high of $2,654.5/mt before lacking upward momentum and declining steadily. It hit a low of $2,622.5/mt during European trading hours. Subsequently, as bulls increased their positions, LME zinc fluctuated upward, eventually closing up at $2,649.5/mt, up $2.5/mt or 0.09%. Trading volume increased to 6,815 lots, and open interest rose by 1,564 lots to 208,000 lots. Last Friday, LME zinc recorded a long lower shadow bullish candlestick, with the 20/40-day moving averages acting as resistance. The rise in US inflation expectations and the US Fed's cautious stance influenced market expectations for the number of interest rate cuts by the US Fed this year. However, market concerns over geopolitical conflict risks have eased somewhat, leading to a slight upward movement in LME zinc. It is expected to fluctuate mainly today.
Last Friday, the most-traded SHFE zinc 2508 contract opened at 21,740 yuan/mt. Early in the session, as bulls increased their positions, SHFE zinc rapidly rose to a high of 27,800 yuan/mt. Subsequently, as bulls reduced their positions, the center of SHFE zinc pulled back below the daily moving average and fluctuated. It hit a low of 21,705 yuan/mt during the session and eventually closed up at 21,750 yuan/mt, up 75 yuan/mt or 0.35%. Trading volume decreased to 39,302 lots, and open interest increased by 1,173 lots to 106,000 lots. Last Friday, SHFE zinc recorded a small bullish candlestick. Macro sentiment has improved somewhat, but domestic consumption is gradually weakening, and inventory buildup is gradually materializing. It is expected that SHFE zinc will continue to fluctuate mainly today.

Tin
Futures Market: The most-traded SHFE tin contract (SN2507) opened slightly higher and maintained high-level consolidation, eventually closing near 263,000 yuan/mt, up 1.17% from the previous trading day.
Macro: (1) China Passenger Car Association (CPCA): Retail sales of narrowly-defined passenger vehicles in June are expected to reach 2 million units, with new energy vehicles expected to reach 1.1 million units (bullish ★). (2) Tesla signs contract for its first grid-side ESS power station project in mainland China (bullish ★). (3) Beijing: Supports game companies in enhancing R&D efficiency through computing power construction, large model deployment, and data governance, offering rewards of up to 30 million yuan (bullish ★). (4) National Development and Reform Commission (NDRC): As of now, this year's trade-in policy for consumer goods has driven sales exceeding the total of last year (bullish ★).
Fundamentals: (1) Supply-side disruptions: Overall tin ore supply in major producing regions such as Yunnan is tightening. As June progresses, some smelters are considering halting production for maintenance or slightly cutting production (bullish ★). (2) Demand side: PV industry: Following the installation rush, orders for PV tin strips in east China have declined, with some producers experiencing a drop in operating rates. Electronics industry: The electronics end-user market in south China has entered the off-season. Coupled with high tin prices, there is a strong wait-and-see sentiment among end-users, with orders only meeting immediate needs. Other sectors: Demand for tinplate, chemicals, etc., remains stable, with no unexpected growth observed.
Spot Market: Market feedback indicates that high prices have suppressed restocking demand, with downstream enterprises mostly choosing to deplete inventories or purchase at later prices. Downstream purchase willingness is low, with transactions primarily meeting immediate needs. The daily average shipments for most traders are only 10-30 mt, concentrated in the lower price range.

Nickel:
Spot Market: On June 20, the SMM 1# refined nickel price was 119,300-121,950 yuan/mt, with an average price of 120,625 yuan/mt, up 300 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, unchanged from the previous trading day. The spot premiums and discounts quotation range for electrodeposited nickel from mainstream domestic brands was 0-400 yuan/mt.
Futures Market: The most-traded SHFE nickel contract (2507) saw narrowed intraday fluctuations and closed slightly higher in the tail session. The night session closed slightly lower: it closed at 118,820 yuan/mt, down 0.06%; the daytime session rebounded: it opened at 118,930 yuan/mt (up 40 yuan), touched an intraday high of 119,130 yuan/mt, and closed at 118,640 yuan/mt in the afternoon session, down 0.21%. LME nickel stabilized, trading at $15,005/mt.
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 a lack of incremental demand, the upside room for nickel prices is limited.