SMM Morning Comment For SHFE Base Metals (July 31)

SHANGHAI, July 31 (SMM) -

Copper

Futures market: Overnight, LME copper opened and touched a high of $9,751/mt, then fluctuated downward throughout the session, nearing a low of $9,676/mt before finally settling at $9,730/mt, down 0.74%. Trading volume reached 16,000 lots, while open interest stood at 271,000 lots. Overnight, the most-traded SHFE copper 2509 contract opened at 78,640 yuan/mt, initially touching a high of 78,770 yuan/mt before fluctuating downward to a low of 78,550 yuan/mt near the close, ultimately settling at 78,700 yuan/mt, down 0.47%. Trading volume reached 28,000 lots, with open interest at 170,000 lots.

Prices: On the macro front, the US Fed kept interest rates unchanged as expected on Wednesday, while strong US economic data left little indication of when it might cut interest rates. The US dollar index expanded its gains, weighing on copper prices. Meanwhile, Trump announced on Wednesday that a 50% tariff would be imposed on all semi-finished copper products entering the US starting August 1, but the tariff would not apply to imported copper cathode. US copper prices plunged 18%. On the fundamental side, overall supply remained tight with limited availability. Demand side, brand price spreads widened during the day, and suppliers' month-end shipment sentiment further declined, with persistently high premiums affecting market trading sentiment. Price-wise, macro uncertainties persist, coupled with weak supply and demand fundamentals. Copper prices are expected to have further downside room today.

Aluminum

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,635 yuan/mt, with a high of 20,670 yuan/mt, a low of 20,595 yuan/mt, and closed at 20,615 yuan/mt, down 0.05% from the previous close. LME aluminum opened at $2,607.5/mt, with a high of $2,621/mt, a low of $2,599.5/mt, and closed at $2,608/mt, up 0.08% from the previous close.

Summary: Macro-wise, the US Fed kept interest rates unchanged, and the US dollar index remained strong. Domestically, policies against "rat race" competition drove industrial metals higher, with the long-term tone of "promoting consumption and stabilizing growth" unchanged. Fundamentally, amid supply increments and off-season demand pressure, inventory buildup expectations remain strong. Additionally, recent market sentiment toward policies like "anti-rat race" and "high-quality development" has cooled, leading the futures market to jump initially and then pull back. In the short term, aluminum prices are expected to pull back from highs. Subsequent attention should be paid to inventory and market sentiment changes.

Lead

Overnight, LME lead opened at $2,019/mt. The market awaited new developments on US tariffs on August 1, while LME lead inventory increased by over 6,000 mt for two consecutive days, leading to rising inventory pressure. LME lead fluctuated downward throughout the day. The US Fed's interest rate decision was announced overnight, with the US dollar index rising strongly. LME lead fell below the $2,000/mt integer mark, reaching a low of $1,989/mt. By the end of the session, LME lead closed at $1,992/mt, down 1.39%, recording five consecutive negative sessions.

Overnight, the most-traded SHFE lead 2509 contract opened at 16,885 yuan/mt. Lead warrant inventory continued to accumulate, while the issue of losses in secondary lead smelting had not yet been resolved. Bulls and bears remained deadlocked throughout the session, with SHFE lead fluctuating mostly between 16,850-16,900 yuan/mt. It eventually closed at 16,880 yuan/mt, down 0.06%, with open interest at 66,552 lots, a decrease of 189 lots from the previous trading day.

Recently, with the resumption of production at primary lead and secondary lead smelters and the commissioning of new capacity, the supply tightness of lead ingots has eased, and spot lead premium transactions have decreased. As of yesterday, primary lead smelters in major producing areas were quoted at premiums of 0-50 yuan/mt against the SMM #1 lead average price for factory delivery. Meanwhile, domestic and overseas lead ingot inventories have been rising at a premium day by day, putting significant pressure on the lead price. Before there is a notable improvement in lead consumption, the lead price may remain in the doldrums with a fluctuating trend.

Zinc

Futures market: Overnight, LME zinc opened at $2,810/mt, briefly fluctuated to a high of $2,818/mt at the beginning, then declined along the daily average line, touching a low of $2,782/mt near the close, and finally settled at $2,795.5/mt, down $19/mt (0.68%). Trading volume decreased to 8,740 lots, while open interest dropped by 1,109 lots to 189,000 lots. Overnight, the most-traded SHFE zinc 2509 contract opened at 22,625 yuan/mt, briefly rose to 22,685 yuan/mt initially, then retreated to a low of 22,535 yuan/mt, and maintained a fluctuating trend below the daily average line before closing at 22,555 yuan/mt, down 115 yuan/mt (0.51%). Trading volume decreased to 61,508 lots, while open interest increased by 816 lots to 117,000 lots.

Zinc price forecast: Overnight, LME zinc recorded a bearish candlestick, with the 10-day moving average above acting as resistance. The US ADP employment data and GDP data for July both exceeded expectations, indicating continued strength in economic data. The US dollar index continued to rise, putting pressure on LME zinc, which declined slightly as it awaited guidance from trade negotiation results. Overnight, SHFE zinc also recorded a bearish candlestick, with the 40-day moving average below providing support. There was no clear macro guidance, and the market was mostly in a wait-and-see mode. However, with weak downstream demand during the recent off-season for consumption, the fundamentals provided insufficient support for zinc prices. Coupled with the drag from the decline in LME, SHFE zinc also weakened slightly.

Tin

Futures market: The most-traded SHFE tin contract (SN2509) dropped slightly during the night session, closing at 266,700 yuan/mt, down 0.39% from the previous trading day.

Macro: (1) Samsung Electronics' semiconductor division reported profits far below expectations, reflecting deepening crises at the world's largest memory chip maker. Affected by US export controls on high-bandwidth memory chips and losses in its foundry division, the key unit posted an operating profit of 400 billion won (approximately $288 million) for the June quarter, compared with analysts' average estimate of 2.73 trillion won. Additionally, the company reported a net profit of 4.93 trillion won on Thursday, missing analysts' forecast of 6.37 trillion won. However, Samsung stated that operational losses at its foundry division are expected to narrow in H2 as demand gradually recovers. (2) US Fed Chairman Powell said Wednesday the central bank has no room to consider government financing needs when setting interest rate policy. Speaking at a press conference following the FOMC meeting, Powell noted the Fed has a congressional mandate to control inflation while maintaining maximum employment. Given this statutory duty, "we don't take into account the federal government's fiscal needs. No central bank in any developed economy does that," adding such practice would also damage the Fed's credibility. The US government's interest payments last year totaled $1.1 trillion, with debt management costs more than doubling from pre-pandemic levels, largely due to the Fed's high-rate policy to curb inflation. Trump previously claimed a 3% rate cut could save the US $100 billion annually.

Fundamentals: (1) Supply-side disruptions: Tin ore supply is tightening in major production areas like Yunnan, with some smelters potentially 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-users in south China entered the off-season, coupled with high tin prices, resulting in strong wait-and-see sentiment with orders limited to just-in-time procurement; Other sectors: Demand remained stable in areas like tinplate and chemicals without exceeding expectations.

Spot market: Spot transactions remained mediocre, with overall tin prices at relatively high levels. Downstream enterprises reported weaker-than-expected orders, maintaining just-in-time procurement strategies and prioritizing inventory usage in production.