SMM Morning Comment For SHFE Base Metals (August 1)

SHANGHAI, August 1 (SMM) -

Copper

Futures market: LME copper opened at $9,626/mt overnight, initially climbed to a high of $9,665/mt, then fluctuated downward to hit a low of $9,580.5/mt during the session, and maintained rangebound fluctuations before finally closing at $9,607/mt, down 1.26%, with trading volume reaching 47,000 lots and open interest at 271,000 lots. The most-traded SHFE copper 2509 contract opened at 78,180 yuan/mt overnight, initially climbed to a high of 78,270 yuan/mt, then maintained rangebound fluctuations before hitting a low of 77,960 yuan/mt toward the close, and finally settled at 78,010 yuan/mt, down 0.55%, with trading volume at 24,000 lots and open interest at 173,000 lots.

Price: Macro side, tariffs generally pushed up prices. Data showed the US inflation rate rebounded in June. As the market expected Trump to outline new tariffs today, inflationary pressures persisted. Meanwhile, uncertainties surrounding countries without trade agreements with the US heightened risk-off sentiment, weighing on copper prices. Fundamentals side, suppliers showed low willingness to sell on the last trading day of the month, while end-use consumption remained weak. Inventory side, as of Thursday July 31, SMM survey showed copper inventories across mainstream Chinese regions decreased 1,000 mt from Monday to 119,300 mt. Weekly inventories stopped declining and rebounded, with total inventories 229,100 mt lower YoY than the 348,400 mt recorded in the same period last year. In summary, macro uncertainties fueled risk-off sentiment, while domestic downstream consumption remained sluggish. Copper prices are expected to encounter resistance today.

Aluminum

Futures Market: On the previous trading day's night session, the most-traded SHFE aluminum 2509 contract opened at 20,480 yuan/mt, with a high of 20,490 yuan/mt, a low of 20,430 yuan/mt, and closed at 20,450 yuan/mt, down 0.29% from the previous close. LME aluminum opened at $2,599/mt, with a high of $2,609/mt, a low of $2,562.5/mt, and closed at $2,562.5/mt, down 1.74%.

Summary: Overall, in terms of macroeconomic factors, the manufacturing PMI index declined in July, indicating a drop in the manufacturing sector's prosperity level. Domestic policies related to "combating rat race competition" have driven up industrial metal prices, with the long-term tone of "promoting consumption and stabilizing growth" remaining unchanged. On the fundamental side, amid the release of supply increments and the suppression of off-season consumption, inventory buildup expectations remain strong. Additionally, recent market sentiment toward policies such as "anti-rat race" and "high-quality development" has cooled, with futures initially jumping and then pulling back. In the short term, aluminum prices are expected to remain in the doldrums. Subsequent attention should focus on inventory levels and shifts in capital sentiment.

Lead

Overnight, LME lead opened at US$1,990/mt. Under the pressure of a weak macro front and high inventory, bears continued to increase their positions after the opening, causing LME lead to fluctuate downward throughout the day, with the lowest price reaching US$1,963/mt, a new low in nearly two months. LME lead eventually closed at US$1,969.5/mt, down 1.13%, recording six consecutive days of decline.

Overnight, the most-traded SHFE lead 2509 contract opened at RMB 16,705/mt. After the opening, bears entered the market in a concentrated manner, causing SHFE lead to drop rapidly to RMB 16,630/mt. During this period, due to the losses in secondary lead production, the tug-of-war between longs and shorts intensified, but the downward trend remained unchanged, with the lowest price reaching RMB 16,615/mt, a low in nearly two months. SHFE lead eventually closed at RMB 16,650/mt, down 0.95%, with its open interest reaching 76,262 lots, an increase of 3,631 lots from the previous trading day.

The macro front is weak, with a large influx of bearish funds into the futures market, causing domestic and overseas lead futures to decline successively. Looking at the fundamentals, this week saw the resumption of production and the commissioning of new capacity at primary lead and secondary lead enterprises, leading to a phased increase in supply. The available spot market cargoes increased significantly compared to last week, and the spot lead premium gradually decreased to parity (against the SMM #1 lead average price). Meanwhile, the overall price center of lead moved downward. In the second half of the week, downstream enterprises' purchasing enthusiasm improved relatively, and they preferred to purchase cargoes self-picked up from smelters with price advantages. The inventory at smelters continued to decline compared to last week, and market activity improved. Additionally, as lead prices fell, the losses in secondary lead smelting further widened. As of yesterday, the loss per mt was 600-800 yuan/mt. The production and shipping sentiment of secondary lead enterprises declined significantly, and the prices of some secondary refined lead have inverted compared to primary lead. We will continue to monitor the supportiveness of secondary lead costs to lead prices.

Zinc

Overnight, LME zinc opened at $2,779/mt. Early in the session, LME zinc reached a high of $2,805/mt, then fluctuated downward along the daily average line, hitting a low of $2,742/mt near the close, and finally closed at $2,762/mt, down $33.5/mt or 1.2%. Trading volume increased to 11,799 lots, and open interest rose by 1,164 lots to 190,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the 5-day moving average acting as resistance. The US June PCE index exceeded expectations unexpectedly, the US dollar index continued to rise, and tariff uncertainties remained, causing LME zinc to continue fluctuating downward.

Overnight, the most-traded SHFE zinc 2509 contract opened at 22,300 yuan/mt. Early in the session, SHFE zinc briefly fluctuated downward to hit a low of 22,285 yuan/mt, then rose continuously, reaching a high of 22,425 yuan/mt during the session before maintaining a rangebound fluctuating trend. It finally closed at 22,400 yuan/mt, up 55 yuan/mt or 0.25%. Trading volume decreased to 44,861 lots, and open interest fell by 1,593 lots to 109,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 40-day moving average acting as resistance. SMM expects domestic refined zinc production to continue rising in August, with the supply-increasing and demand-weakening pattern on the fundamentals side remaining unchanged. SHFE zinc will maintain a fluctuating trend overnight, and attention should be paid to changes in macro sentiment.

Tin

Futures: The most-traded SHFE tin contract (SN2509) opened lower in the night session and maintained a low-level consolidation, closing at 264,200 yuan/mt, down 0.74% from the previous trading day.

Macro: (1) US President Trump signed an executive order setting "reciprocal tariff" rates ranging from 10% to 41% for multiple countries and regions. According to the order, Taiwan was assigned a 20% reciprocal tariff. Unspecified countries will uniformly apply a 10% tariff rate. Additionally, goods from countries or regions circumventing tariffs through transshipment via third locations will be subject to a 40% transshipment tax. (2) Tariffs—① White House: Trump will sign an executive order on July 31 to impose higher tariff rates on multiple countries that fail to reach trade agreements by the August 1 deadline.
② US Treasury Secretary: The entire trade team is frustrated with India. ③ Malaysian Prime Minister: The US tariff rates on Malaysian goods will be announced soon. ④ India reportedly seeks to sign free trade agreements with several countries. ⑤ Trump stated the US-Mexico tariff agreement will be extended for 90 days, meaning Mexico will continue paying 25% fentanyl tariffs, 25% auto tariffs, and 50% tariffs on steel, aluminum, and copper.

Fundamentals: (1) Supply-side disruptions: Tin ore supply tightens in major production areas like Yunnan, with some smelters likely to maintain maintenance shutdowns or minor production cuts in August (Bullish★). (2) Demand side: PV industry: After the installation rush, tin bar orders in east China declined, and some producers reduced operating rates. Electronics industry: End-users in south China entered the off-season, coupled with high tin prices, leading to strong wait-and-see sentiment, with orders meeting only essential needs. Other sectors: Demand for tinplate, chemicals, etc., remained stable without exceeding expectations.

Spot market: Spot transactions recovered slightly, with some traders trading 20-30 mt and a few trading 2-3 truckloads. Downstream enterprises saw order growth and conducted minor restocking and essential purchases yesterday under inventory pressure.