SMM Morning Comment For SHFE Base Metals (July 16)

SHANGHAI, July 16 (SMM) –

Copper

Futures market: Overnight LME copper opened at $9,635.5/mt, initially fluctuated downward to hit a session low of $9,598/mt, then steadily climbed upward and reached a session high of $9,657.5/mt near the close, finally closing at $9,657.5/mt with a 0.15% gain. Trading volume reached 15,000 lots, and open interest stood at 279,000 lots. Overnight SHFE copper's most-traded 2508 contract opened at 77,960 yuan/mt, initially dipped to a session low of 77,810 yuan/mt, then oscillated upward and touched a session high of 78,160 yuan/mt near the close before pulling back slightly to close at 78,070 yuan/mt, up 0.18%. Trading volume reached 21,000 lots, and open interest stood at 168,000 lots.

Prices: Macro drivers include US June CPI posting the largest MoM gain in five months, with tariffs potentially fueling inflation, though overall US stagflation risks weighing on US dollar bullishness toward copper. Meanwhile, Trump's Russia sanctions with a 50-day grace period eased immediate supply disruption fears, extending oil price declines, though OPEC maintains "very robust" Q3 oil demand expectations, supporting copper prices. Fundamentals show supply-side pressures as the final trading day for SHFE copper 2507 contract approached, with suppliers' quoting enthusiasm dampened by contract rollover impacts. Demand-side sentiment remains weak despite suppliers adjusting premium offers, failing to boost transactions. US Treasury Secretary's positive remarks on China-US trade talks and ongoing tariff developments suggest limited upside room for copper prices today.

Aluminum

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2508 contract opened at 20,415 yuan/mt, with a high of 20,445 yuan/mt, a low of 20,370 yuan/mt, and closed at 20,390 yuan/mt. The trading volume was 24,000 lots, and the open interest was 203,000 lots. On the previous trading day, LME aluminum opened at $2,596.5/mt, with a high of $2,604.5/mt, a low of $2,574.5/mt, and closed at $2,583/mt.

Summary: Domestically, the macroeconomic environment remains favorable. In the US, consumer price inflation rose to a five-month high in June, with costs for some goods increasing, indicating that tariffs are beginning to impact inflation and may lead the US Fed to adopt a wait-and-see attitude before September. Fundamentals: Domestic electrolytic aluminum operating capacity slightly decreased due to replacement projects, the proportion of liquid aluminum declined to 74.78%, and casting ingot volume increased. On the cost side, recent upward trends emerged due to rising alumina prices. On the demand side, most downstream sectors remained in a sluggish off-season atmosphere; aluminum prices rose during the off-season, leading to more pronounced demand suppression, while aluminum processing operating rates remained sluggish. Combined with the renewed social inventory buildup of domestic electrolytic aluminum ingots, SMM expects aluminum prices to consolidate at high levels in the short term, with close monitoring required for subsequent inventory and demand changes.

Lead

Overnight, LME lead opened at $2,008.5/mt. During the Asian session, it fluctuated downward, reaching a low of $1,985/mt in the European session. It then slightly rebounded and consolidated near the intraday average line, eventually closing at $2,001/mt, down by $4/mt or 0.2%. Bulls continued to reduce their positions and exit the market, with LME lead recording a four-day losing streak.

Overnight, the most-traded SHFE lead contract opened at 16,930 yuan/mt. After consolidating near the intraday average line in the early session, it dropped to a low of 16,875 yuan/mt. It then fluctuated upward throughout the session, reaching a high of 16,945 yuan/mt. After slight consolidation, it eventually closed at 16,935 yuan/mt, down by 75 yuan/mt or 0.44%.

In terms of supply, there is only a slight expectation of recovery in secondary refined lead production in July. Regular maintenance of primary lead production in Yunnan, Inner Mongolia, and other regions has not yet concluded, and the raw material supply conflict provides strong bottom support for lead prices. Delivery brand enterprises have limited cargoes available for transfer to delivery warehouses. After the completion of transfer to delivery warehouses, the expected continuous increase in domestic social inventory is expected to slow down. Lead prices have stopped falling and stabilized in the short term, but subsequent rebounds still require support from the actual performance of downstream production and end-use consumption. Lead prices may still continue to fluctuate and consolidate.

Zinc

Overnight, LME zinc opened at $2,740/mt. After opening, LME zinc touched a high of $2,734.5/mt, then fluctuated downward all the way below the daily average line, reaching a low of $2,687/mt during the night session. It slightly rose towards the end of the session, closing down at $2,701.5/mt, a drop of $31/mt or 1.13%. Trading volume decreased to 110,000 lots, while open interest increased by 183 lots to 194,000 lots. Overnight, SHFE zinc opened at 22,040 yuan/mt. After opening, SHFE zinc touched a high of 22,065 yuan/mt, then declined below the daily average line due to longs reducing their positions, reaching a low of 21,965 yuan/mt. Subsequently, it rose partially as bears reduced their positions, closing down at 22,005 yuan/mt, a drop of 80 yuan/mt or 0.36%. Trading volume decreased to 42,365 lots, while open interest decreased by 2,354 lots to 81,950 lots.

Zinc Price Outlook: Overnight, LME zinc recorded a bearish candlestick, with the 5-day moving average acting as resistance above and the 60-day moving average providing support below. The overall US CPI rebounded slightly in June, while core CPI fell short of expectations. The mild inflation report may prompt the US Fed to maintain interest rates unchanged for the time being. The US dollar index continued to rise, while overseas zinc inventory continued to increase, and the center of LME zinc prices kept declining. Overnight, SHFE zinc recorded a bearish candlestick, with the 60-day moving average acting as resistance above and the lower Bollinger Bands providing support below. China's GDP grew by 5.3% YoY in the first half of the year, and the State Council Information Office stated that consumption policies would continue to be strengthened in the second half. Additionally, the US Treasury Secretary said that the China-US negotiations were "in a good state," with strong macro support. However, the domestic fundamental pattern of strong supply and weak demand remained unchanged, and SHFE zinc was expected to remain in the doldrums.

Tin

Futures: The most-traded SHFE tin contract (SN2508) fluctuated upward slightly during the night session, climbing to around 263,900 yuan/mt before closing, up 0.10% from the previous trading day.

Macro: (1) Multiple domestic chip industry sources stated that in H1, production capacity at several major domestic chip producers was "fully booked," with companies like Kunlunxin and Cambricon experiencing overwhelming orders. Domestic GPU makers are seizing the opportunity during the recent three-month vacuum period to aggressively target the H20 market. (2) Advanced Micro Devices (AMD) announced plans to resume exports of its MI308 chips to China after the US indicated approval, following a similar decision regarding Nvidia's semiconductor products. An AMD spokesperson confirmed on Tuesday that the US Commerce Department informed the company its MI308 license application would proceed to review—a reversal of Trump-era policies. In April, AMD estimated the export restrictions on MI308 chips would cost it approximately $800 million. Earlier, Nvidia also stated that the US government agreed to approve exports of its H20 AI chips to China, a decision potentially adding billions to its annual revenue. (Bullish★) (3) Tariffs—① US Treasury Secretary recently signaled no concern over the expiration date of the US-China partial tariff suspension, calling negotiations "progressing well." ② EU Commission Vice President Maroš Šefčovič will meet with the US Trade Representative. ③ Trump: A trade deal with Indonesia will impose 19% tariffs on Indonesian exports to the US, while US exports to Indonesia will enjoy tariff- and non-tariff-barrier-free treatment. Transshipped goods will face combined tariffs from both origin and transit countries. ④ US Commerce Secretary Lutnick: "We don’t impose tariffs on raw steel, only on finished steel products."

Fundamentals: (1) Supply-side disruptions: Tin ore supply remains tight in key production regions like Yunnan, with some smelters likely maintaining maintenance shutdowns or minor production cuts in July (Bullish★). (2) Demand side: PV sector—Post installation rush, tin bar orders in east China declined, lowering operating rates at some producers; Electronics—South China’s end-user electronics entered the off-season, compounded by high tin prices and strong wait-and-see sentiment, with orders limited to rigid demand; Other sectors—Steady demand in tinplate and chemical applications without exceeding expectations.

Spot market: Despite prices pulling back below 265,000 yuan/mt, downstream purchase willingness remains weak, with restocking mostly following a "small-batch, multi-frequency" strategy for rigid needs. Smelters continue holding prices tightly, limiting actual transactions. Most traders reported deals around 20 mt, while a few closed 1-2 truckloads, leaving the overall spot market sluggish.

Nickel:

Spot Market: on July 15, the SMM 1# refined nickel price ranges from 119,200 to 121,600 yuan/mt, with an average price of 120,400 yuan/mt, down 1,350 yuan/mt from the previous trading day. The mainstream spot premium quotation range for Jinchuan #1 refined nickel is 2,000-2,100 yuan/mt, with an average premium of 2,050 yuan/mt, up 100 yuan/mt from the previous trading day. The spot premiums and discounts quotation range for electrodeposited nickel from domestic mainstream brands is -100-300 yuan/mt.

Futures Market: The most-traded SHFE nickel 2508 contract closed down 1.08% at 119,460 yuan/mt in the night session; it opened lower and continued to decline in the daytime session, closing at 118,940 yuan/mt by the midday session, down 1.52%, barely holding above the 119,000 yuan/mt threshold. Macro factors dominate the direction, with risks of a downward shift in the price center. If tariffs are imposed or the US Fed delays interest rate cuts, SHFE nickel prices may decline further. In the short term, nickel prices may continue to be in the doldrums, with a core range of 118,000-123,000 yuan/mt.