SMM Morning Comment For SHFE Base Metals (August 4)

SHANGHAI, August 4 (SMM) -

Copper

Futures market: Overnight, LME copper opened at $9,626/mt, initially touched a high of $9,665/mt, then fluctuated downward to a low of $9,580.5/mt during the session, and ended rangebound at $9,607/mt by the close, down 1.26%. Trading volume reached 47,000 lots, and open interest stood at 271,000 lots. Overnight, the most-traded SHFE copper 2509 contract opened at 78,180 yuan/mt, initially touched a high of 78,270 yuan/mt, then fluctuated rangebound to a low of 77,960 yuan/mt by the close, and finally settled at 78,010 yuan/mt, down 0.55%. Trading volume reached 24,000 lots, and open interest stood at 173,000 lots.

Prices: Macro-wise, tariffs broadly pushed up commodity prices. US June inflation data showed a rebound, and with Trump expected to outline new tariffs today, inflationary pressures persist. Market uncertainty surrounding countries without US trade agreements heightened risk-off sentiment, weighing on copper prices. Fundamentally, suppliers showed limited willingness to sell on the month-end settlement day, while end-use consumption remained sluggish. Inventory-wise, as of Thursday, July 31, SMM-reported mainstream Chinese copper inventories decreased by 1,000 mt from Monday to 119,300 mt, marking a weekly inventory rebound. Total inventories were 229,100 mt lower than the 348,400 mt recorded during the same period last year. In summary, macro uncertainties fueled risk aversion, while domestic downstream demand underperformed, suggesting copper prices may encounter resistance today.

Aluminum

Futures Market: On Friday evening, the most-traded SHFE aluminum 2509 contract opened at 20,460 yuan/mt, with a high of 20,495 yuan/mt, a low of 20,405 yuan/mt, and closed at 20,480 yuan/mt. Trading volume was 43,000 lots, and open interest was 230,000 lots. On Friday, LME aluminum opened at $2,565/mt, with a high of $2,576/mt, a low of $2,543/mt, and closed at $2,571.5/mt.

Summary: From a macro perspective, the implementation of a new round of tariff hikes by the US, involving major trading partners such as Canada and Brazil, has escalated trade barriers and heightened concerns about global economic growth, negatively impacting the demand outlook for industrial metals. Although domestic manufacturing data shows structural optimization, the market remains cautious about the effectiveness of subsequent policy stimulus measures. Fundamentals: Supply side, domestic operating aluminum capacity remained stable, while the proportion of liquid aluminum pulled back, leading to an increase in casting ingot volume, which boosted market supply availability. Coupled with continuous social inventory buildup, aluminum prices faced upward pressure. Cost side, aluminum production costs held steady WoW, with no significant changes in raw material prices during the period. However, the price center of aluminum pulled back, narrowing the industry's average profit by around 149 yuan/mt. Demand side, downstream off-season sentiment persisted, with spot purchasing as needed and weak spot premiums. PV, NEV, and home appliance sheet sectors remained in the off-season. Despite the pullback in aluminum prices, processing plants saw no clear improvement in orders on hand. Inventory-wise, according to SMM statistics, domestic aluminum social inventory stood at 564,000 mt on August 4, up 20,000 mt WoW. Against the off-season backdrop, inventory buildup expectations remain strong. Overall, macro-wise, the domestic positive sentiment persists, with the "rat race" competition sentiment digested. Market focus now shifts to the outcome of China-US negotiations. Fundamentals-wise, amid supply increment releases and off-season demand pressure, inventory buildup expectations remain strong, with spot premiums/discounts in the doldrums. Aluminum prices are expected to maintain a pressured trend. Close attention should be paid to inventory and demand changes.

Lead

Last Friday, LME lead opened at $1,970/mt. During the Asian session, it fluctuated downward. Entering the European session, it initially declined and then rebounded, touching a low of $1,961/mt before rallying to make up for losses. Due to the unexpectedly weak non-farm payrolls data, Trump dismissed the head of the Bureau of Labor Statistics, and expectations for an interest rate cut surged overnight. The US dollar index plunged, releasing pressure on LME lead. It reached a high of $1,981/mt in the tail end of the session and closed at $1,974/mt, up 0.23%.

On Friday evening, the most-traded SHFE lead 2509 contract opened at 16,780 yuan/mt. After briefly touching a high of 16,830 yuan/mt in the early session, it fluctuated downward. During the session, it hit a low of 16,745 yuan/mt and closed at 16,775 yuan/mt, up 0.69%.

In terms of lead fundamentals, both supply and demand expectations are increasing. Additionally, due to the decline in lead prices, losses for secondary lead have further widened, dampening the enthusiasm of secondary lead smelters for selling. Secondary refined lead prices have inverted compared to primary lead. Downstream enterprises are shifting their purchases towards the primary lead market, leading to a decline in primary lead enterprise inventories. The next focus will be on the production trends of secondary lead enterprises under loss conditions and whether social warehouse inventories can be reduced. If one of these expectations is met, there will be an opportunity for lead prices to stop falling and rebound.

Zinc

Futures Market: Last Friday, LME zinc opened at $2,769/mt. In the early session, LME zinc fluctuated rangebound around the daily average line. During European trading hours, LME zinc fluctuated downward amid short selling and long liquidation, approaching the night session and hitting a low of $2,711.5/mt. Entering the night session, LME zinc recovered upward but was blocked by the daily average line, eventually closing down at $2,725.5/mt, down $32.5/mt or 1.18%. Trading volume increased to 14,107 lots, while open interest decreased by 568 lots to 189,000 lots. Last Friday, the most-traded SHFE zinc 2509 contract opened lower with a gap at 22,225 yuan/mt. In the early session, SHFE zinc briefly touched a high of 22,265 yuan/mt before the price center moved below the daily average line. Near the end of the session, it recovered upward to around 22,235 yuan/mt, eventually closing down at 22,225 yuan/mt, down 120 yuan/mt or 0.54%. Trading volume decreased to 53,871 lots, while open interest decreased by 2,926 lots to 105,000 lots.

Zinc Price Outlook: Last Friday, LME zinc recorded three consecutive negative sessions, with the middle rail of the Bollinger Bands forming resistance. The unexpected disappointment in non-farm payrolls data last Friday indicated a weak US job market, raising market concerns about the US economic outlook and causing the center of LME zinc to move lower. Last Friday, SHFE zinc recorded a small bearish candlestick, with the KDJ opening expanding downward. Affected by the decline in LME last Friday, SHFE zinc was in the doldrums. Against the backdrop of increased production by smelters, there was insufficient consumption support, and zinc prices encountered resistance. Attention should be paid to capital dynamics.

Tin

Last week, the domestic and overseas tin markets overall exhibited a fluctuating downward trend, influenced by multiple factors. On the international macro front, the US and Japan reached an automobile tariff agreement, setting the tariff on imported Japanese cars at 15%. However, this news did not have a significant impact on tin prices. Domestically, the supply of tin ore in the market tightened, with reduced supply from major producing areas such as Yunnan. Some smelters maintained production shutdowns for maintenance or slightly cut production. 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, leading to strong wait-and-see sentiment among end-users, who only maintained necessary orders. Demand in other sectors such as tinplate and chemicals remained stable, without unexpected growth. The spot market saw sluggish transactions, with most traders only achieving single-digit transaction volumes. On the supply side, Indonesia's refined tin exports are gradually returning to normal levels, with exports of around 4,400 mt in June and a 73.6% YoY increase in refined tin exports in H1. Bahlil Lahadalia, Minister of Energy and Mineral Resources (ESDM) of Indonesia, announced to the media that starting from 2026, the Work Plan and Budget (RKAB) in the mineral and coal mining sector will be implemented on an annual basis, adjusted from the current three-year cycle to a one-year cycle. Mining companies are required to submit new RKAB production plans for 2026 starting from October 2025. It is expected that the SHFE tin price will continue to maintain a fluctuating trend in the future. Investors need to closely monitor changes in international macro policies and domestic supply and demand conditions, and operate cautiously.