SMM Morning Comment For SHFE Base Metals (July 28)

SHANGHAI, July 28 (SMM) -

Copper

Futures market: On Friday night, LME copper opened at $9,818.5/mt, initially fluctuating at highs and touching $9,852.5/mt during the session, then fluctuating downward throughout, nearing the session end to touch a low of $9,766.5/mt before a slight rebound at the close to settle at $9,796/mt, down 0.59%, with trading volume at 12,000 lots and open interest at 270,000 lots. On Friday night, the most-traded SHFE copper 2509 contract opened at 79,180 yuan/mt, initially fluctuating at highs and touching 79,300 yuan/mt, then fluctuating downward throughout, nearing the session end to touch a low of 78,730 yuan/mt before a slight rebound at the close to settle at 78,800 yuan/mt, down 0.67%, with trading volume at 36,000 lots and open interest at 178,000 lots.

Prices: Macro-wise, the US dollar index rebounded for the second consecutive day, supported by strong economic data, weighing on copper prices. On tariffs, Trump stated that the US had reached a tariff agreement with the EU at a 15% rate and was considering agreements with three to four other countries, with optimistic trade sentiment expected to limit copper price declines. Supply side, arrivals of domestic cargoes in Shanghai weighed on mainstream parity prices intraday, though overall supply remained tight. Demand side, downstream consumption willingness was low recently. Despite just-in-time procurement last Friday, high copper prices suppressed downstream purchasing enthusiasm. Price-wise, as the US tariff hike deadline approaches this week, the potential 50% tariff could still pressure copper prices. For now, trade sentiment has eased somewhat, limiting downside room for copper prices today.

Aluminum

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,765 yuan/mt, with a high of 20,790 yuan/mt, a low of 20,605 yuan/mt, and closed at 20,615 yuan/mt, down 0.70% from the previous close. LME aluminum opened at $2,646.0/mt, with a high of $2,659.5/mt, a low of $2,630.5/mt, and closed at $2,631.0/mt, down 0.57%.

Summary: Macro-wise, the US dollar rose on Friday, supported by resilient US economic data indicating the US Fed may remain patient in resuming interest rate cuts. Meanwhile, progress in tariff negotiations with certain countries has clarified trade conditions, easing market uncertainties. Domestically, policies against "rat race" competition have driven industrial metals higher, with the long-term tone of "sales promotions and stable growth" remaining unchanged. Fundamentals-wise, supply increments and off-season demand continue to pressure the market, with inventory buildup expectations still strong. Additionally, recent sentiment toward policies like "anti-rat race" and "high-quality development" has cooled, causing futures to jump initially and then pull back. Aluminum prices are expected to fluctuate at highs in the short term. Subsequent focus should be on inventory and fund sentiment changes.

Lead

Last Friday, LME lead opened at $2,026.5/mt. During the Asian session, LME lead fluctuated upward, and coupled with the drawdown in LME lead inventory, the overall center of operation moved higher, reaching a peak of $2,041.5/mt during the period. However, in the tail end of the night session, LME lead reversed its trend and pulled back, surrendering most of its gains, and ultimately closed at $2,020.5/mt, down 0.12%.

Last Friday, the most-traded SHFE lead 2509 contract opened at 16,960 yuan/mt. Driven by the rise in LME lead, SHFE lead surged rapidly to 17,085 yuan/mt at the opening. However, with the cumulative increase in visible inventory of lead ingots and the gradual recovery of supply, SHFE lead pulled back after hitting a high and fell below 17,000 yuan/mt again, ultimately closing at 16,845 yuan/mt, down 0.38%. Its open interest stood at 71,589 lots, a decrease of 1,738 lots from the previous trading day.

Currently, some major primary lead smelters are still undergoing maintenance and have not fully resumed operations, leading to prominent regional supply tightness. The narrowing of spot discounts and the shift towards premium trading (against the SMM #1 lead average price) may boost lead prices to hold up well. Meanwhile, the progress of production resumptions in the secondary lead sector has been gradually advancing, and there are signs of improvement in the inverted price relationship between secondary refined lead and primary lead. Before the price spread between the two reverses, it will still support the rise in lead prices. If the premium turns into a discount, it means that this factor will no longer be considered a bullish one. Lead prices may maintain a consolidation trend in the short term.

Zinc

On last Friday, LME zinc opened at $2,842/mt. During the morning session, LME zinc fluctuated around the daily average line, then fluctuated upward throughout the afternoon session. During the night session, LME zinc reached a high of $2,856/mt before pulling back all the way. Near the end of the session, LME zinc touched a low of $2,816.5/mt, closing down at $2,829/mt, a drop of $11.5/mt or 0.4%. Trading volume decreased to 8,275 lots, while open interest increased by 2,366 lots to 191,000 lots. On last Friday, LME zinc recorded a bearish candlestick, with the upper Bollinger Band forming resistance. On last Friday, the most-traded SHFE zinc 2509 contract opened at 22,905 yuan/mt. In the early session, SHFE zinc fluctuated upward to reach a high of 22,960 yuan/mt, then quickly declined to touch a low of 22,670 yuan/mt. Subsequently, it maintained a fluctuating trend near the end of the session, closing down at 22,715 yuan/mt, a drop of 170 yuan/mt or 0.74%. Trading volume increased to 93,396 lots, while open interest increased by 1,621 lots to 131,000 lots.

Inventory: On July 25, LME zinc inventory decreased by 1,125 mt to 115,775 mt, a drop of 0.96%. According to SMM data, as of July 24, the total zinc ingot inventory across seven locations tracked by SMM was 98,300 mt, an increase of 4,700 mt from July 17 and 5,600 mt from July 21, indicating a rise in domestic inventory.

Summary: On last Friday, LME zinc recorded a bearish candlestick, with the upper Bollinger Band forming resistance. As the China-US tariff and trade negotiations approach, the market is cautious, with some bearish capital entering the market, causing LME zinc to fluctuate downward. On last Friday, SHFE zinc recorded a bearish candlestick, with the 5-day moving average forming resistance above. The positive sentiment brought by previous policies has gradually dissipated, with zinc ingot inventory continuously accumulating. The fundamental situation of strong supply and weak demand persists, coupled with the drag from overseas market trends, causing SHFE zinc to pull back from its highs.

Tin

Last week, in terms of international macroeconomic developments, the US and Japan reached an automobile tariff agreement, setting the tariff on imported Japanese cars at 15%. Additionally, US Treasury Secretary Bessent stated that August 1st would be a "relatively firm deadline" for all countries. Domestically, the tin ore market overall exhibited a tightening supply situation, with reduced tin ore supply in major producing areas such as Yunnan. Some smelters may maintain production shutdowns for maintenance or implement minor production cuts. On the demand side, after the installation rush in the PV industry ended, orders declined. The electronics industry entered the off-season, coupled with high tin prices, resulting in strong wait-and-see sentiment among end-users, who only maintained orders for immediate needs. Demand in other sectors such as tinplate and chemicals remained stable, without showing unexpected growth. The spot market saw sluggish transactions, with most traders only achieving single-digit transaction volumes. Overall, the tight supply and weak demand led to tin prices fluctuating upward. It is expected that tin prices will continue to maintain a fluctuating trend this week. Investors are advised to pay attention to changes in international macroeconomic policies and domestic supply and demand conditions, and operate cautiously.