SMM Morning Comment For SHFE Base Metals (August 22)

SHANGHAI, August 22 (SMM) -

Copper

Futures: LME copper opened at $9,677.5/mt overnight, initially touched a low of $9,673/mt, then the price center gradually moved upward and approached $9,746.5/mt near the end of the session, finally closing at $9,734.5/mt, up 0.14%, with trading volume reaching 10,000 lots and open interest at 264,000 lots. The most-traded SHFE copper 2509 contract opened at 70,680 yuan/mt overnight, initially fell to 98,600 yuan/mt, then fluctuated upward and touched a high of 98,890 yuan/mt near the end of the session, up 0.2%, with trading volume reaching 12,000 lots and open interest at 125,000 lots.

Prices: On the macro front, US economic data showed mixed performance, with the August composite PMI hitting an eight-month high, but initial jobless claims rose significantly. Within the US Fed, there are still differences of opinion on interest rate cuts, with most officials taking a cautious stance, while Bullard advocates for significant easing. Domestically, China plans to launch a 500 billion yuan quasi-fiscal tool, focusing on supporting artificial intelligence, new energy, and infrastructure sectors. The latest policy directly benefits the AI and new energy industries, which is bullish for copper prices. On the fundamental side, imported copper continues to arrive, but domestic copper shipments are relatively low. Overall supply remains stable, while consumption remains mediocre. In terms of inventory, as of August 21, SMM's national mainstream copper inventories decreased by 2,000 mt from Monday to 131,700 mt. Overall, considering both macro and fundamental factors, copper prices are expected to have limited upside today.

Aluminum

Futures: In the previous trading night session, the most-traded SHFE aluminum 2510 contract opened at 20,590 yuan/mt, reached a high of 20,730 yuan/mt, a low of 20,585 yuan/mt, and closed at 20,720 yuan/mt, up 0.63% from the previous close. LME aluminum opened at $2,577/mt, hit a high of $2,594.5/mt, a low of $2,568.5/mt, and closed at $2,593/mt, up 0.62% from the previous close.

Summary: High aluminum prices have somewhat suppressed off-season consumption, but as the peak season approaches, expectations for order improvements strengthen. Weekly aluminum ingot inventory pressure decreased, with inventories slightly dropping to 596,000 mt. The SHFE aluminum backwardation structure strengthened slightly, supporting a rebound in aluminum prices above yuan 20,600/mt. Overall, short-term consumption shows only marginal improvement, and aluminum ingot inventories face renewed buildup pressure. However, current total inventory is not high, and some secondary aluminum enterprises in Anhui and Jiangxi provinces have received notices about the termination of tax refund policies, posing a risk of declining capacity utilization rates for scrap utilization enterprises, which provides some support for primary aluminum consumption. Future aluminum prices depend on the realization of peak consumption season. Next week, SHFE aluminum is expected to trade between yuan 20,500-20,800/mt, while LME aluminum is projected to range between $2,540-2,600/mt.

Lead

Overnight, LME lead opened at $1,978.5/mt, continuing the consolidation pattern of the previous trading day throughout the day. During the Asian session, LME lead fluctuated at highs between $1,975 and $1,985/mt. In the afternoon, LME lead pulled back from highs, especially after the US dollar index strengthened, with the center of LME lead's operation moving below $1,970/mt. Overnight, LME lead attempted to recover losses but failed, ultimately closing at $1,970/mt, down 0.53%.

Overnight, the most-traded SHFE lead 2509 contract opened at 16,755 yuan/mt. Lead warrant inventory fell by over 1,000 mt, and SHFE lead gradually fluctuated upward, reaching a high of 16,800 yuan/mt during the session, ultimately closing at 16,790 yuan/mt, up 0.18%. Its open interest reached 42,843 lots, a decrease of 1,387 lots from the previous trading day. Additionally, the SHFE lead 2509 contract has been gradually shifting to the 2510 contract in recent days. Pay attention to the change of the most-traded contract.

After this week's delivery, goods will re-enter the circulation market, and the supply of goods in the spot market will be relatively loose, with an increase in primary lead transactions at discounts. At the same time, smelters in Anhui, a major production area for secondary lead, were mostly in a state of reduced or halted production. The regional supply of lead ingots remained tight, and due to losses, the prices of secondary lead and primary lead experienced an inversion, leading downstream enterprises to prefer purchasing primary lead. Especially when lead prices fell this week, some downstream enterprises purchased as needed and accepted supplies from nearby warehouses, further reducing social inventory of lead ingots. Currently, in the Tianjin area, vehicle restrictions are in place on certain sections due to the SCO summit, and after August 23, regions such as Henan will also enter a period of vehicle transportation control, which may affect the inflow and outflow of lead ingots at some warehouses.

Zinc

Futures: Overnight, LME zinc opened at $2,782.5/mt, initially oscillating around the daily moving average. During European trading hours, it touched a high of $2,790/mt. Subsequently, with increased short positions, LME zinc plunged, and its center pulled back, reaching a low of $2,760.5/mt during the night session. It finally closed down at $2,767/mt, a decrease of $19/mt or 0.68%. Trading volume increased to 7,299 lots, and open interest rose by 574 lots to 192,000 lots. The most-traded SHFE zinc 2510 contract opened at 22,215 yuan/mt, initially dropping to 22,230 yuan/mt, then oscillated near the daily moving average, and finally closed up at 22,250 yuan/mt, an increase of 10 yuan/mt or 0.04%. Trading volume decreased to 40,684 lots, and open interest increased by 452 lots to 111,000 lots.

Social Inventory: On August 21, LME zinc inventory fell by 1,875 mt to 69,375 mt, a 2.63% decline. According to SMM, as of Thursday (August 21), the total zinc ingot inventory in seven locations was 132,900 mt, an increase of 3,700 mt from August 14, and a decrease of 2,600 mt from August 18, indicating a reduction in domestic inventory.

Zinc price forecast: Overnight, LME zinc recorded a small bearish candlestick, with the 10/20-day moving averages forming resistance above. The US S&P Global Composite PMI for August hit an 8-month high, leading traders to reduce their bets on two interest rate cuts by the US Fed this year, and the center of LME zinc prices moved downward. Overnight, SHFE zinc recorded a small bullish candlestick; domestic consumption remains relatively weak, but macro sentiment is positive, and there is still an optimistic expectation for macro policies, causing the center of SHFE zinc prices to edge up slightly.

Tin

SMM Tin Morning Briefing on August 22, 2025:

Futures: The most-traded SHFE tin contract (SN2509) fluctuated rangebound at a low level during the night session, closing at 266,800 yuan/mt, down 0.3% from the previous trading day.

Macro: (1) A US government official stated that the Trump administration is considering taking stakes in companies receiving funds under the Chips Act, but major semiconductor firms increasing investments in the US are not on the list. US Commerce Secretary Rutenik previously confirmed that the government was in talks to acquire a 10% stake in Intel and said the government might also consider taking stakes in other companies. This statement has raised concerns among industry executives who worry that the government may also take stakes in large chip manufacturers like TSMC, Micron, and Samsung. Sources say TSMC (TSM.N) executives have had preliminary discussions about refunding subsidies if the US government demands to become a shareholder. This indicates that the US government's move could face opposition from businesses. (2) According to two informed sources, the Trump administration is considering a plan to reallocate at least $2 billion from the Chips Act to fund critical mineral projects and enhance Commerce Secretary Rutenik's influence over strategic industries. The proposed measure would draw funds from grants for semiconductor research and chip factory construction, avoiding new spending requests. One source said strengthening Rutenik's role in critical mineral financing would also help centralize the government's overall strategy for the industry. White House officials pushed for this approach after last month's Pentagon investment in rare earth company MP Materials sparked discussions on the US government's mineral strategy. (3) Cleveland Fed President Harmack said she would not support an interest rate cut in September if the US Fed were to make a policy decision tomorrow. "Inflation is too high and has been rising over the past year," Harmack said in an interview on Thursday. "Based on the information I have, I don't see a reason to lower rates if we were to meet tomorrow." She acknowledged concerns about the labour market but noted that the unemployment rate remains close to her estimate of full employment. "Overall, I think it's important to maintain a mild tightening policy stance to continue pulling inflation back to target levels."

Fundamentals: (1) Supply-side disruptions: Overall tin ore supply in main production areas such as Yunnan is tightening, with some smelters expected to remain closed for maintenance or slightly cut production in August (Bullish ★). (2) Demand side: PV industry: After the installation rush, orders for PV solder bars in east China have declined, leading to a decrease in operating rates for some producers; Electronics industry: In south China, the electronics end-user sector has entered the off-season, coupled with high tin prices, resulting in a strong wait-and-see sentiment, with orders only maintaining essential needs; Other sectors: Demand for tinplate, chemicals, and other areas remains stable, without any unexpected growth.

Spot market: Downstream enterprises generally adopted a cautious stance, maintaining only minimal restocking needs for production. High prices suppressed trading volume, with traders' daily trading volume mostly ranging from 5 mt to 20 mt, and a few reaching over 30 mt (one truckload). However, overall activity remained sluggish.