SMM Morning Comment For SHFE Base Metals (September 3)

SHANGHAI, September 3 (SMM) -

Copper

Futures: LME copper opened at $9,873.5/mt overnight, initially touched a low of $9,851/mt at the beginning of the session, then rose all the way and touched a high of $10,015/mt near the end of the session, finally closed at $10,013.5/mt, up 1.4%, with trading volume reaching 26,000 lots and open interest reaching 277,000 lots. The most-traded SHFE copper 2510 contract opened at 79,500 yuan/mt overnight, initially fell to 79,470 yuan/mt at the beginning of the session, then the center of copper prices gradually moved upward and touched a high of 80,440 yuan/mt near the end of the session, finally closed at 80,410 yuan/mt, up 0.79%, with trading volume reaching 38,000 lots and open interest reaching 186,000 lots.

Price: On the macro front, the Trump administration plans to hold an emergency meeting on Wednesday regarding the appeal of the tariff ruling. If the appeal fails, relevant tariffs may be revoked and taxes refunded, with the market closely watching the developments. Additionally, the new round of US sanctions on Iran's oil exports, along with OPEC+'s expectation to maintain current production levels and pause further output increases at this weekend's meeting, jointly drove the continued upward trend in international crude oil prices, which is positive for copper prices. On the fundamentals side, supply side, imported and domestic supplies continued to arrive, but high-quality copper supply remained relatively tight, with the overall supply market being relatively loose. Demand side, high copper prices suppressed downstream purchasing sentiment. Considering both macro and fundamental factors, it is expected that copper prices will have support below today.

Aluminum

Futures: In the previous trading night session, the most-traded SHFE aluminum 2510 contract opened at 20,680 yuan/mt, with a highest price of 20,865 yuan/mt, a lowest price of 20,665 yuan/mt, and closed at 20,845 yuan/mt, up 0.60% from the previous trading day's closing price. The trading volume was 60,200 lots, and the open interest was 220,000 lots. In the previous trading day, LME opened at $2,619.5/mt, with a highest price of $2,625/mt, a lowest price of $2,600/mt, and closed at $2,621.5/mt.

Summary: On the macro front, rising expectations for US Fed interest rate cuts, coupled with China's policies boosting domestic demand, have created an overall favorable atmosphere, potentially improving the aluminum consumption outlook. However, it will take time for domestic supportive policies to translate into actual consumption. Fundamentally, on the supply side, with the commissioning of a small amount of replacement capacity, operating capacity is steadily increasing slightly, and production is growing modestly. The proportion of liquid aluminum is expected to rebound in September. Cost side, the weekly total cost of the aluminum industry changed minimally, with high industry profits remaining. Demand side remains the core focus for the market going forward. As the September-October peak season approaches, downstream weekly operating rates showed stronger signs of recovery last week, with operating rates in sectors like aluminum extrusion and aluminum plate/sheet, strip and foil all increasing to some extent. Entering early September, current consumption only shows marginal improvement, and effective inventory destocking still requires time to materialize. However, total inventory is not high, and some secondary aluminum enterprises in provinces like Anhui and Jiangxi 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. During the traditional peak season in September, aluminum prices are overall more likely to rise than fall, but top-side pressure remains. For aluminum prices to effectively break through the significant resistance level of 21,000 yuan/mt, it will require the realization of expectations for the September-October peak season in aluminum consumption, validated by the subsequent emergence of a turning point in domestic aluminum ingot destocking and sustained strength in downstream operating performance.

Lead

Overnight, LME lead opened at $2,003.5/mt, briefly touched a high of $2,007/mt before plunging. During the European session, it dipped to $1,984.5/mt, then recovered some losses by the close to end at $1,998.5/mt, down 0.42%.

Overnight, the most-traded SHFE lead 2510 contract opened lower with a gap at 16,810 yuan/mt, touched a low of 16,800 yuan/mt before rebounding. Bears reduced positions, pushing SHFE lead to fluctuate upward and close at a high of 16,895 yuan/mt, up 0.12%.

Entering September, increased maintenance at primary and secondary lead smelters, coupled with unresolved raw material supply tensions and further declines in lead concentrate TCs, may support prices to hold up well on anticipated supply reductions. However, it is worth noting that after the conclusion of this week's Shanghai Cooperation Organization Summit in Tianjin and the military parade in Beijing, attention will shift to the lifting of logistics and transportation restrictions in North China. At that time, spot market circulation supply will increase. Considering the current lackluster performance of lead consumption, there is a possibility of short-term downward pressure on lead prices.

Zinc

Futures: Overnight, LME zinc opened at $2,831/mt. Bulls increased positions at the start, driving LME zinc up along the daily moving average. During European trading hours, the price center shifted to around $2,860/mt before bears entered and bulls exited, testing lower levels. In the night session, the price center moved down to $2,840/mt but rebounded to consolidate near $2,860/mt by the close, settling at $2,865.5/mt, up $32.5/mt (1.15%). Trading volume rose to 13,277 lots, while open interest increased by 4,327 lots to 197,000. Overnight, the most-traded SHFE zinc 2510 contract opened at 22,250 yuan/mt. After briefly testing 22,230 yuan/mt at the start, it rose steadily on bull entry and bear exit, closing at the day’s high of 22,365 yuan/mt, up 100 yuan/mt (0.45%). Trading volume stood at 59,362 lots, while open interest fell by 956 lots to 107,000.

Zinc Price Forecast: LME zinc recorded a four-day winning streak overnight, with various moving averages providing support below and the KDJ gap expanding upward. Zinc prices fluctuated upward overnight, as LME inventory continued to decline while the LME 0-3 backwardation structure widened to $20.44/mt, with increased fund concentration. SHFE zinc formed a bullish candlestick with a bare head overnight, facing resistance from the 20/40 daily average moving averages above. Under the macro expectation of an interest rate cut, bearish funds mainly exited the market overnight, coupled with the upward movement of SHFE zinc driven by LME, but fundamental support remains insufficient. Monitor fund dynamics.

Tin

Futures: The most-traded SHFE tin contract (SN2510) hit bottom at 272,000 yuan/mt during the night session, then rebounded gradually to 274,000 yuan/mt and closed at 274,100 yuan/mt, down 0.08% from the previous trading day.

Macro: (1) Nvidia (NVDA.O) stated that recent media reports about H100/H200 chips being "supply constrained" and "sold out" are false. As we explained in our earnings report, cloud service partners can indeed lease all H100/H200 chips online, but this does not mean we cannot accept new orders. We have sufficient H100/H200 inventory to immediately meet all order demands. Rumors that H20 chip sales are cutting into H100/H200 or Blackwell product supplies are also completely untrue—H20 sales will not affect Nvidia's supply capability for other products. (2) India's tax committee proposed a significant increase in the consumption tax on luxury EVs, recommending raising the tax rate on EVs priced between 2 million and 4 million rupees (approximately $22,700 to $45,400) from 5% to 18%, and supporting higher taxes on EVs priced over $46,000, stating these vehicles are used by the "high-end segment" of society. (3) Trump: An emergency meeting on tariff rulings will be held on Wednesday. An appeal will be filed with the Supreme Court as early as Wednesday; if the tariff appeal is rejected, tariffs will have to be withdrawn. If the tariff ruling is unfavorable, trillions of US dollars will have to be refunded. The Supreme Court will be urged to expedite the ruling.

Fundamentals: (1) Supply-side disruptions: Overall tin ore supply is tightening in major production areas like Yunnan, with some smelters maintaining production halts for maintenance in September (Bullish ★). (2) Demand side: PV industry: After the installation rush, orders for PV tin bars in east China declined, and some producers saw lower operating rates; Electronics industry: Electronics end-users in south China entered the off-season, coupled with high tin prices, leading to strong wait-and-see sentiment among end-users, with orders only meeting just-in-time procurement; Other sectors: Demand remained stable in areas such as tinplate and chemicals, without exceeding expectations.

Spot market: Spot market transactions cooled, with most traders reporting only single-digit transactions yesterday. Downstream and end-user enterprises largely adopted a wait-and-see attitude toward current prices, maintaining just-in-time procurement.