SMM Morning Comment For SHFE Base Metals (Jan 21)

SHANGHAI, Jan 21 (SMM) –
Copper
LME copper opened at $9,178/mt, initially dipped to $9,149/mt, then surged to a high of $9,297/mt during the session, and fluctuated rangebound at the close, finally settling at $9,266/mt, up 0.92%. Trading volume reached 22,000 lots, and open interest rose to 291,000 lots. Overnight, the most-traded SHFE copper 2503 contract opened at 75,350 yuan/mt, initially dipped to 75,200 yuan/mt, then climbed steadily to an intraday high of 75,870 yuan/mt, and dropped back slightly at the close, finally settling at 75,740 yuan/mt, up 0.09%. Trading volume reached 31,000 lots, and open interest rose to 158,000 lots. Macro side, Trump officially took the oath of office as US President, delivering the longest inaugural address since 1929, mentioning topics such as tariffs, energy, and green policies, but omitting cryptocurrency. US media reported that Trump is expected to release a trade policy memorandum on Monday but will not impose new tariffs on his first day in office. Affected by the news, market concerns over the US-China trade war eased, the US dollar index plunged, and LME copper hit a new high. Fundamentally, domestic copper cathode arrivals were limited, while imported copper cathode increased slightly. However, as downstream end-user enterprises gradually went on holiday and largely completed stockpiling, market transactions were moderate. As of Monday, January 20, SMM copper inventories in major regions nationwide increased by 1,700 mt from last Thursday to 109,800 mt, up 29,000 mt compared to the same period last year. Among them, Shanghai inventories were 14,800 mt higher YoY, Guangdong inventories were 3,900 mt higher YoY, and Jiangsu inventories were 9,500 mt higher YoY. Under weak consumption, weekly inventories are expected to continue increasing. Price side, copper prices are expected to find some support at the bottom today.
Aluminum
The most-traded SHFE aluminum 2503 contract opened at 20,440 yuan/mt overnight, hitting a high of 20,490 yuan/mt and a low of 20,375 yuan/mt, and closed at 20,460 yuan/mt, up 55 yuan/mt or 0.27%. On Monday, it opened at $2,680/mt, reached a high of $2,705/mt and a low of $2,667/mt, and closed at $2,687.5/mt, up $7/mt or 0.26%.
Summary: Macro side, on January 20, Trump officially took office and announced that no new tariffs would be imposed immediately. This news drove the US dollar index to a low of 108.27, boosting base metals. Fundamentals side, supply disruptions decreased, and with ample supply, the cost side of the aluminum industry eased significantly. As of yesterday, the immediate full average cost of domestic aluminum fell to around 19,000 yuan/mt. Specifically, alumina costs accelerated downward over the past week, with reduced purchase willingness for high-priced alumina in the market. Spot alumina prices are expected to continue declining, weakening cost support for aluminum. Demand side, as the Chinese New Year holiday approaches, aluminum processing plants began to close for the holiday this week, leading to a noticeable weakening in demand. Social inventory may enter the inventory buildup cycle during the holiday. In the short term, attention should focus on the pace of changes in domestic and overseas macro sentiment, the impact of falling spot alumina prices on aluminum costs, and the continuation of downstream holiday schedules and pre-holiday stocking.
Lead
Overnight, LME lead opened at $1,967.5/mt, edged down slightly during the Asian session, then strengthened significantly during the European session amid a broad rally in base metals, reaching a high of $1,995.5/mt before pulling back. It finally closed at $1,972/mt, up $6.5/mt or 0.33%.

Overnight, the most-traded SHFE lead 2503 contract opened at 16,785 yuan/mt, rose to a high of 16,875 yuan/mt in early trading before retreating to near the intraday moving average, and eventually closed at 16,825 yuan/mt, up 90 yuan/mt or 0.54%.
In the final week before the Chinese New Year, logistics and transportation in some regions have already stopped or increased shipping costs. The lead spot market is entering a countdown phase, with the vast majority of downstream enterprises having completed pre-holiday stockpiling, and only a few continuing to make low-price purchases as needed. Regarding downstream production halts and holidays, some lead-acid battery enterprises in Zhejiang, Guangdong, and Jiangsu regions began suspending operations last weekend, with most lead-acid battery producers expected to gradually enter holiday mode around the Chinese New Year. Suppliers are conducting final clearance sales, with premiums for refined lead quotations adjusted downward in some regions, and lead ingot social warehouse inventory continuing to decline. It is expected that the holiday atmosphere will gradually intensify, further weakening lead ingot market transactions, and lead prices will continue to fluctuate rangebound.
Zinc
Overnight, Trump was officially sworn in as the US President, mentioning topics such as tariffs, energy, and green policies, without touching on cryptocurrencies. US media reported that Trump would not impose new tariffs on his first day in office. Houthi forces stated they would continue attacking vessels linked to Israel. The head of the Israeli Defense Forces said a "major operation" is expected to be launched soon in the West Bank. Putin stated that Russia is willing to engage in dialogue with the US government on the Ukraine situation. President Xi Jinping emphasized that by 2025, more proactive and effective macro policies should be implemented to promote high-level technological self-reliance and strength. Vice Premier He Lifeng stressed the importance of vigorously implementing urban renewal and advancing key urban renewal tasks in a strong, orderly, and effective manner. Offshore yuan surged 750 points against the US dollar during the day, recovering to 7.27.
Overnight, LME zinc opened at $2,941.5/mt, with bulls and bears engaging in a tug-of-war. The center of LME zinc fluctuated around $2,935/mt. During the European trading session, bears increased positions, causing the center of LME zinc to rise slightly before quickly pulling back to a low of $2,925/mt. Entering the night session, LME zinc climbed rapidly to a high of $2,986/mt before gradually pulling back, ultimately closing higher at $2,957/mt, up $12.5/mt or 0.42%. Trading volume decreased to 70,864 lots, while open interest increased by 3,352 lots to 223,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the 40-day moving average forming resistance above and the 5/10-day moving averages providing support below. LME zinc inventory decreased by 2,225 mt to 199,125 mt overnight, a decline of 1.11%. Trump did not mention imposing higher tariffs during his inauguration ceremony yesterday, and the US dollar index fell. US media also reported that Trump would not impose new tariffs on his first day in office. LME zinc rose slightly and is expected to maintain a fluctuating trend in the short term.
Overnight, the most-traded SHFE zinc 2503 contract opened at 24,230 yuan/mt. In early trading, SHFE zinc edged downward to a low of 24,155 yuan/mt. Subsequently, bulls increased positions, driving SHFE zinc to fluctuate upward and reach a high of 24,420 yuan/mt. Later, bulls took profits and exited, causing SHFE zinc to fluctuate downward, ultimately closing higher at 24,310 yuan/mt, up 95 yuan/mt or 0.39%. Trading volume decreased to 79,416 lots, while open interest fell by 1,884 lots to 101,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 20/60-day moving averages forming resistance above and the 5/10-day moving averages providing support below. As the off-season for downstream consumption approaches, spot premiums/discounts in various markets are gradually declining, and domestic inventory is gradually increasing. However, influenced by Trump's yet-to-be-announced tariff policies, SHFE zinc is expected to maintain a fluctuating trend.

Tin
Donald Trump was officially sworn in as the President of the United States. The US President-elect Donald Trump stated, "We will impose tariffs and taxes on foreign countries to benefit our citizens, rather than taxing our citizens to enrich other nations. To this end, we are establishing a foreign tax bureau to collect all tariffs and taxes." During yesterday's night session, SHFE tin prices showed a strong upward trend. In the futures market, the most-traded SHFE tin contract prices climbed to recent highs, with active market trading and an increase in trading volume. Influenced by the collective gains in the overseas metal market, especially the significant rise in LME tin, positive signals were sent to the domestic market. Overnight,
LME tin surged, further boosting optimism in the domestic market for SHFE tin. Against this backdrop, the most-traded SHFE tin contract prices continued to rise, reaching new recent highs. In the spot market, due to the strong performance of the futures market, spot tin prices also increased. Suppliers and traders showed greater confidence in the market, but downstream enterprises remained cautious in their purchasing, waiting for better restocking opportunities. From a technical perspective, SHFE tin prices have broken through recent resistance levels, and the upward momentum remains strong. However, investors should remain cautious when chasing high prices, paying attention to market dynamics and policy risks.

Nickel sulphate
On January 20, the SMM battery-grade nickel sulphate index price was 26,534 yuan/mt, with the quotation range for battery-grade nickel sulphate at 26,310-26,990 yuan/mt, and the average price increased compared to the previous day.
Cost side, LME nickel prices rose today, widening cost support. Currently, the production of nickel sulphate from high-grade nickel matte and intermediate products is experiencing negative profit margins. Demand side, most precursor plants have completed nickel salt stocking for January, with only a small portion still requiring restocking. Spot order market inquiries remained sluggish. Some precursor plants are expected to sign February monthly contracts for nickel sulphate this week. Supply side, finished product inventories at salt plants are critically low, leading to tight supply. Overall, under the pattern of tight supply and rising costs, prices still have room for upward movement.