SMM Morning Comment For SHFE Base Metals (July 18)

SHANGHAI, July 18 (SMM) -

Copper

Futures market: Overnight, LME copper opened at $9,606.5/mt, initially touched a low of $9,597/mt, then fluctuated upward rangebound, and finally closed at $9,678/mt, up 0.43%, with trading volume at 11,000 lots and open interest at 268,000 lots. Overnight, the most-traded SHFE copper 2508 contract opened and touched a low of 77,800 yuan/mt, then fluctuated upward, approaching a high of 78,310 yuan/mt before pulling back slightly to close at 78,260 yuan/mt, up 0.46%, with trading volume at 19,000 lots and open interest at 151,000 lots.

Prices: Macro side, the US Commerce Department reported on Thursday that June retail sales, often referred to as the "terror data," grew 0.6% MoM, rebounding from May's sharp 0.9% decline and significantly exceeding market expectations of 0.1% growth. As tariff impacts began affecting consumer prices, US Fed officials remained divided on interest rate cuts. Additionally, Thailand announced plans to exempt 90% of US goods from tariffs, while the EU proposed new service tariffs and export controls on the US, indicating continued macro uncertainty. Supply side, standard-quality copper remained scarce, with some high-quality copper supply replenished, while SX-EW copper stayed tight. Demand side, suppliers maintained high premiums during the day, but early SHFE copper price declines dampened market sentiment, with downstream buyers remaining cautious and procurement activity subdued. Inventory side, as of Thursday July 17, SMM survey showed copper inventories in mainstream Chinese regions fell by 4,300 mt from Monday to 143,300 mt, down 400 mt WoW from the previous Thursday, ending two consecutive weeks of increases. Price side, current macro and fundamental bearish factors suggest copper prices may continue facing upward pressure today.

Aluminum

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,400 yuan/mt, with a high of 20,545 yuan/mt, a low of 20,380 yuan/mt, and closed at 20,520 yuan/mt. Trading volume was 58,900 lots, and open interest was 274,000 lots. On the previous trading day, LME aluminum opened at $2,573.5/mt, with a high of $2,590/mt, a low of $2,558/mt, and closed at $2,589/mt.

Summary: Macro-wise, the domestic favorable sentiment persists. Overseas markets are currently grappling with tariff negotiations and personnel change rumors, leading to fluctuating risk appetite. On the fundamentals, capacity replacement policies are accelerating the commissioning of Yunnan hydropower aluminum projects. However, as the industry is in the off-season, the release of new supply will further exacerbate the supply-demand imbalance, putting pressure on aluminum prices. Cost side, the alumina spot market expects stronger delivery and warehousing, causing futures prices to retreat from earlier gains. However, spot market liquidity remains tight, and spot prices are slow to follow the decline. Thus, alumina cost support for aluminum has not significantly weakened, with limited short-term impact on aluminum costs. Demand side, as the off-season deepens, aluminum semis producers saw weak consumption, and the proportion of liquid aluminum pulled back from highs. Coupled with adjustments in aluminum shipment pace (such as shipment slowdown potentially delaying inventory buildup speed temporarily), short-term inventory fluctuations occurred. However, against the off-season backdrop, inventory buildup remains the dominant trend, with strong expectations for further accumulation. Overall, SMM expects aluminum prices to show a volatile pattern in the short term.

Lead

Overnight, LME lead opened at $1,975.5/mt. During the Asian session, it rose slightly. Entering the European session, it first declined and then rebounded, touching a low of $1,967/mt. After operating in the doldrums under pressure from the intraday moving average, it rallied to close at $1,978/mt, down $0.5/mt or 0.03%.

Overnight, the most-traded SHFE lead contract opened at 16,825 yuan/mt. In the early session, it rose slightly to touch a high of 16,845 yuan/mt. After that, it fluctuated rangebound around the intraday moving average, eventually closing at 16,825 yuan/mt, down 45 yuan/mt or 0.27%, and recording a doji.

Recently, lead prices have been in a weak consolidation phase. The shipping enthusiasm of primary lead and secondary lead smelters has declined. Coupled with maintenance and production cuts at smelters in Henan province, this has led to a tightening of regional lead ingot supply, resulting in queues for cargo pick-up. At the beginning of the week, the transfer of lead ingot inventory due to transfer to delivery warehouse led to a continued increase in social inventory of lead ingots in social warehouses. As the weekend approached, the spread between futures and spot prices narrowed, prompting suppliers to halt their inventory transfer actions. As a result, the growth in social inventory of lead ingots slowed down. Multiple smelters in Hunan and Henan provinces experienced a sell-out of inventory and adopted a wait-and-see attitude. There is no expected short-term recovery in the supply of lead ingots in the Henan region. Downstream rigid demand may shift to consuming inventory from social warehouses. The short-term reduction in supply may provide support for lead prices.

Zinc

Overnight, LME zinc opened at $2,704.5/mt, then fluctuated upward along the daily average line. During the European trading session, LME zinc dipped to $2,686.5/mt, before continuously rising above the daily average line and touching a high of $2,740.5/mt. It eventually closed higher at $2,737.5/mt, up $38/mt or 1.14%. Trading volume decreased to 60,614 lots, while open interest increased by 103 lots to 187,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened higher with a gap at 22,175 yuan/mt. After opening, SHFE zinc dipped to 22,130 yuan/mt, before bulls increased their positions and SHFE zinc rose to touch a high of 22,370 yuan/mt. Subsequently, a tug-of-war between longs and shorts ensued, with SHFE zinc fluctuating rangebound around 22,350 yuan/mt. It eventually closed higher at 22,345 yuan/mt, up 225 yuan/mt or 1.02%. Trading volume decreased to 80,014 lots, while open interest increased by 4,323 lots to 109,000 lots.

Zinc Price Outlook: Overnight, LME zinc recorded a bullish candlestick, with the upper Bollinger Bands acting as resistance and the 60-day moving average providing support. Overnight, the EU proposed to impose new tariffs on US services and export controls as a retaliatory measure after the breakdown of trade negotiations. Meanwhile, US retail sales in June recorded a 0.6% increase, higher than the previous value and expected value, with excellent data performance reaching a new high since March this year. Market sentiment was driven to recover, overshadowing the lobbying disturbances. Trump once again called on the US Fed to cut interest rates, and the center of LME zinc moved upwards. Overnight, SHFE zinc recorded a bullish candlestick, with the upper Bollinger Bands forming resistance and the 40/60-day daily average providing support below. Affected by LME, SHFE zinc opened higher with a gap, but the domestic fundamental situation remained unchanged. The impact of the off-season and the expectation of loose supply provided insufficient support for zinc prices to continue surging. Subsequent attention should still be paid to changes in macro sentiment. It is expected that SHFE zinc will continue to oscillate in the short term.

Tin

Futures: The most-traded SHFE tin contract (SN2508) opened lower and moved higher during the night session, fluctuating upward to around 263,000 yuan/mt before settling near 263,000 yuan/mt, up 0.50% from the previous trading day.

Macro: (1) The Ministry of Finance issued an announcement adjusting the consumption tax policy for ultra-luxury vehicles. The scope of taxation is revised to "passenger vehicles and light commercial vehicles with retail prices of 900,000 yuan (excluding VAT) or above, regardless of powertrain type (including pure electric, fuel cell, etc.)." Pure electric and fuel cell ultra-luxury vehicles without cylinder capacity (displacement) will only be subject to consumption tax at the retail stage. No consumption tax will be levied on second-hand ultra-luxury vehicles sold by taxpayers. (2) TSMC (TSM.N), the world's largest semiconductor foundry, reported Q2 earnings on Thursday, with net profit surging 60.7% YoY to a record high of NT$398.3 billion ($13.53 billion), exceeding market expectations of NT$377.9 billion, driven by surging demand for AI-related chips. (Bullish★) (3) Tariffs—① Vice Chairman of the Thai Chamber of Commerce: Thailand will propose exempting 90% of US goods from tariffs. ② UK media: The EU plans to impose new service tariffs and export controls on the US as retaliation after trade talks collapsed. ③ White House trade advisor Navarro: EU VAT is also a subsidy. We hope to see VAT reductions and lower tariffs. ④ Brazilian President Lula: Will regulate and tax US digital companies.

Fundamentals: (1) Supply-side disruptions: Tin ore supply tightens in major production areas like Yunnan, with some smelters likely maintaining maintenance shutdowns or minor production cuts in July. (Bullish★) (2) Demand side: PV sector: Orders for PV tin bars in east China declined after the installation rush, with operating rates dropping at some producers; Electronics sector: End-user demand in south China entered the off-season, compounded by high tin prices, leading to strong wait-and-see sentiment and only essential orders; Other sectors: Stable demand in tinplate and chemical industries, without exceeding expectations.

Spot market: The overall spot market remained sluggish, with downstream enterprises' intended purchase prices mostly below 259,000 yuan/mt and low bid levels. Most traders reported transactions of 10-20 mt, while a few closed deals exceeding one truckload.