SMM Morning Comment For SHFE Base Metals (July 22)

SHANGHAI, July 22 (SMM) -

Copper

Futures market: LME copper opened at $9,851/mt overnight, fluctuated downward to test the low of $9,841/mt at the beginning of the session, then the center of copper prices moved straight up to probe $9,871/mt, followed by considerable fluctuations before finally closing at $9,867/mt, up 0.74%, with trading volume at 14,000 lots and open interest at 266,000 lots. The most-traded SHFE copper 2509 contract opened at 79,720 yuan/mt overnight, fluctuated downward to test the low of 79,540 yuan/mt at the beginning of the session, then the center of copper prices gradually moved up to probe the high of 79,840 yuan/mt, before finally closing at 79,770 yuan/mt, up 0.64%, with trading volume at 28,000 lots and open interest at 161,000 lots.

Prices: Macro perspective, the EU is considering potential countermeasures against US tariffs but prioritizes diplomatic negotiations, easing market concerns about a sharp escalation in trade conflicts. The White House denied rumors of "firing Powell," while Republican lawmakers sent a letter to the Justice Department regarding perjury allegations, weighing on the US dollar index and supporting copper prices. Fundamental side, both imported copper and domestic copper arrivals remained low this week, coupled with strong downstream cargo pick-up and good outflows from warehouses. As of Monday, July 21, SMM's national mainstream copper inventories declined to 118,600 mt. Demand side, downstream purchasing sentiment gradually weakened after copper prices stopped falling and rebounded, creating a situation of weak supply and demand that provides some support for copper prices.

Aluminum

Futures: In the previous night session, the most-traded SHFE aluminum 2509 contract opened at 20,850 yuan/mt, hitting a high of 20,875 yuan/mt and a low of 20,790 yuan/mt, before closing at 20,860 yuan/mt, up 0.10% from the previous close. LME aluminum opened at $2,635.0/mt, reached a high of $2,651.5/mt and a low of $2,629.0/mt, and settled at $2,641.0/mt, up 0.11%.

Summary: Overall, in terms of macro factors, domestic policies related to "anti-rat race" competition have driven up industrial metals, with the long-term tone of "promoting consumption and stabilizing growth" remaining unchanged; overseas macro uncertainties still persist. Fundamentally, inventory performance has fluctuated due to factors like delivery schedules, but considering the release of incremental supply and the suppression from the off-season demand, expectations for inventory buildup remain strong. Recently, capital sentiment has been significantly influenced by macro policies such as "anti-rat race" and "high-quality development," with spot aluminum prices expected to fluctuate at highs in the short term. Subsequent attention should focus on inventory and capital sentiment changes.

Lead

Overnight, LME lead opened at $2,010/mt, fluctuating rangebound in the Asian session. Entering the European session, it slightly rose to a high of $2,017.5/mt, with bulls and bears vying for control. LME lead then dipped to a low of $1,994/mt before rallying again in the tail end, closing at $2,015/mt, up 0.17%.

Overnight, the most-traded SHFE lead 2508 contract opened at 16,950 yuan/mt, touching a low of 16,910 yuan/mt early in the session. After bears reduced their positions, it rallied, reaching a high of 16,990 yuan/mt during the session, and closed at 16,965 yuan/mt, up 0.18%.

After lead prices stopped falling and rebounded, the enthusiasm of lead smelters for selling has recovered, especially secondary lead smelters planning to resume production as needed. The spot circulation volume in some regions has increased, providing downstream enterprises with more purchasing options. Currently, there is no significant improvement in end-use consumption in the lead-acid battery market. Downstream enterprises are only making just-in-time procurement, resulting in a slow digestion of social inventory of lead ingots. Additionally, some suppliers continue to transfer inventory to social warehouses, and the growth trend of social warehouses remains unchanged. Furthermore, due to the maintenance status of some primary lead enterprises in Central China, the issue of regional tight supply still exists. Therefore, the growth trend of social inventory of lead ingots has slowed down compared to last week. Overall, lead prices may hold up well in the short term.

Zinc

Futures Market: Overnight, LME zinc opened at $2,825/mt. Early in the session, LME zinc quickly dipped to $2,823.5/mt before consolidating around $2,840/mt. During European trading hours, bears reduced their positions, causing LME zinc to rally to $2,876/mt. Subsequently, the price center pulled back below the daily average line, closing up at $2,844.5/mt, up $20.5/mt or 0.73%. Trading volume decreased to 18,296 lots, while open interest fell by 2,926 lots to 184,000 lots. Overnight, the most-traded SHFE zinc 259 contract opened at 22,880 yuan/mt. Early in the session, SHFE zinc was in the doldrums, dipping to 22,760 yuan/mt. Subsequently, amid longs entering and shorts exiting, SHFE zinc fluctuated upward, with the price center moving up to around 22,870 yuan/mt. It closed up at 22,875 yuan/mt, up 90 yuan/mt or 0.39%. Trading volume decreased to 72,406 lots, while open interest fell by 1,049 lots to 132,000 lots.

Zinc Price Forecast: Overnight, LME zinc recorded a long upper shadow bullish candlestick, with the upper track of the Bollinger Bands providing support below. Overnight, LME zinc reached a nearly four-month high, primarily due to a sharp increase in LME cancelled warrants to 59,900 mt, with the ratio of cancelled warrants increasing to over half, triggering supply concerns. Subsequent attention should be paid to the funds of major players and inventory changes. Overnight, SHFE zinc recorded a doji, with various moving averages below providing support. Driven by LME overnight, SHFE zinc fluctuated at highs, filling the previous gap in zinc prices. However, caution is advised against the pressure from hedging positions at highs, and prudent operation is recommended.

Tin

Futures Market: The most-traded SHFE tin contract (SN2508) opened slightly higher in the night session and maintained high-level consolidation, closing at 267,500 yuan/mt, up 0.74% from the previous trading day.

Macro: (1) A person in charge of the Department of Circulation Development of the Ministry of Commerce discussed the development of China's wholesale and retail industries from January to June 2025. Since the beginning of this year, over 66 million consumers have purchased over 109 million units of 12 major categories of home appliances through trade-in policies, and over 69 million consumers have purchased over 74 million units of digital products such as mobile phones. Additionally, 82,000 sales outlets nationwide have launched e-bike trade-in programs, with a cumulative total of 9.056 million new vehicles traded in. According to data from the National Bureau of Statistics (NBS), from January to June, the retail sales of household appliances and audio-visual equipment in units above designated size increased by 30.7% YoY, and the retail sales of communication equipment in units above designated size increased by 24.1% YoY. (Bullish ★) (2) The US Congressional Budget Office (CBO) estimates that the tax and spending bill (One Big Beautiful Bill Act, OBBBA) recently signed into law by Trump will increase the US deficit by $3.4 trillion over the next decade. According to the CBO's analysis, the bill includes cuts to Medicaid and other expenditures, as well as provisions that will lead to 10 million Americans losing health insurance by 2034. The CBO's scoring reflects that, compared to the current law baseline, US revenue will decrease by $4.5 trillion and spending will decrease by $110 million by 2034. (3) Tariffs - ① EU diplomat: The EU is exploring broader potential countermeasures against US tariffs. ② Indonesia: A 19% US tariff may take effect before August 1, depending on a joint statement. ③ US Treasury Secretary: More concerned about high-quality deals than completing them before August 1. No need to fall out with Europe. ④ The Indian trade delegation has returned to India and is expected to reach a deal with the US before September to October.

Fundamentals: (1) Supply-side disruptions: Overall tin ore supply in major production areas such as Yunnan is tightening, and some smelters may maintain production shutdowns for maintenance or slightly cut production in July. (Bullish ★) (2) Demand side: PV industry: After the installation rush, orders for PV tin strips in east China have declined, and the operating rates of some producers have decreased. Electronics industry: The electronics terminal market in south China has entered the off-season, coupled with high tin prices, resulting in strong wait-and-see sentiment among terminals, and orders are only maintained to meet immediate needs. Other sectors: Demand for tinplate, chemicals, etc. remains stable, with no unexpected growth observed.

Spot Market: The spot market remains sluggish, with overall trading volume being low. Most traders have only single-digit transactions, and a few traders have transactions of around one truckload. Traders reported that downstream enterprises had basically no purchase intentions yesterday, with few orders placed, and the orders were placed at low levels.