[Overnight, LME Aluminum and SHFE Aluminum Edged Up Slightly, but Aluminum Prices Faced Short-Term Pressure at High Levels] Continued destocking in LME inventory provided bottom support for LME aluminum, but amid tightening fund liquidity and profit-taking by bulls, upward momentum remained insufficient, and the backwardation structure weakened somewhat. China’s social inventory rose to a high for the same period in nearly five years, and the inventory buildup cycle had yet to end, with high inventory and weak spot fundamentals jointly weighing on upward momentum. The divergence between domestic and overseas drivers continued, the SHFE/LME price ratio kept weakening, and prices were mainly under pressure in the short term.

SMM Morning Meeting Summary: Overnight, LME copper opened at $12,093.5/mt. Early in the session, the center of copper prices gradually moved lower and fell to $11,754/mt, then fluctuated upward to a high of $12,228.5/mt, before seeing wide swings and finally closing at $12,211.5/mt, down 1.05%. Trading volume reached 46,900 lots, open interest stood at 288,600 lots, an increase of 239 lots from the previous trading day. Overnight, the most-traded SHFE copper 2605 contract opened at 92,500 yuan/mt and fell to 91,820 yuan/mt early in the session. The center of copper prices then fluctuated upward to a high of 95,530 yuan/mt, before fluctuating rangebound and finally closing at 94,920 yuan/mt, down 0.91%. Trading volume reached 153,000 lots, open interest stood at 197,000 lots, down 6,302 lots from the previous trading day, mainly due to long liquidation.

[Macro Pressures Combined With High Inventory, SHFE Aluminum Remained Under Pressure at Elevated Levels in the Short Term] Continued destocking in LME inventory provided bottom support for LME aluminum, but amid tightening fund liquidity and profit-taking by bulls, upward momentum was insufficient, and the backwardation structure weakened somewhat. In China, social inventory rose to a high for the same period in nearly five years, and the inventory buildup cycle had not ended. High inventory and weak spot fundamentals jointly weighed on upward momentum. The divergence between domestic and overseas drivers continued, the SHFE/LME price ratio kept weakening, and SHFE aluminum fell below the key threshold of 25,000 yuan/mt, remaining mainly under pressure at elevated levels in the short term.

Today, the most-traded BC copper 2604 contract opened at 87,780 yuan/mt. After the opening, it hovered at highs and then touched a high of 87,890 yuan/mt. By the close of the morning trading session, its center had fallen to 84,000, after which it returned to its normal trading range. It finally consolidated sideways to close at 87,050 yuan/mt, down 1.62. Open interest stood at 5,432 lots, down 167 lots from the previous trading day, while trading volume reached 5,024 lots, up 1,566 lots from the previous trading day. On the macro front, Trump said he was not yet ready to end the conflict immediately, but said he would withdraw before long; Iran’s supreme leader firmly rejected the proposal for peace talks, insisting on retaliation and compensation. Meanwhile, the secretary of Iran’s Supreme National Security Council and the head of the Basij militia were confirmed dead, and Iran was urgently filling candidates for key positions. Amid the combined impact of escalating geopolitical tensions and demand concerns triggered by elevated LME inventory, copper prices were overall under pressure and bearish. Fundamentals side, arrivals of both imported and domestic cargo remained stable, and overall supply was ample. Demand side, downstream purchase willingness rebounded as copper prices pulled back. The SHFE copper 2604 contract closed at 98,590 yuan/mt. Based on the BC copper 2604 contract at 87,050 yuan/mt, its after-tax price was 98,367 yuan/mt. The price spread between the SHFE copper 2604 contract and BC copper was 223 yuan/mt, and the spread remained in contango structure, widening from the previous day.

SMM Morning Meeting Summary: Overnight, LME copper opened at $12,724.5/mt. In early trading, it fluctuated upward to a high of $12,829.5/mt, after which the center of copper prices shifted straight downward to a low of $12,721/mt. It then fluctuated upward in a pullback and finally closed at $12,780/mt, down 1.07%. Trading volume reached 17,000 lots, and open interest stood at 293,000 lots, down 8,255 lots from the previous trading day, mainly due to longs reducing positions. Overnight, the most-traded SHFE copper 2604 contract opened at 99,120 yuan/mt. In early trading, it rose to 99,530 yuan/mt, then fluctuated downward all the way to a low of 98,900 yuan/mt. Afterwards, the center of copper prices moved upward and finally closed at 99,140 yuan/mt, down 0.92%. Trading volume reached 27,700 lots, and open interest stood at 177,000 lots, down 1,993 lots from the previous trading day, mainly due to longs reducing positions.

[SMM Morning Meeting Summary: LME Inventory Increased by 20kt, LME Zinc Came Under Pressure] Overnight, LME zinc opened at $3,277/mt. In early trading, LME zinc briefly rose to a high of $3,293/mt before bulls reduced open interest, sending LME zinc fluctuating downward throughout the session and touching a low of $3,210/mt during the night session. The center then rebounded slightly, and it finally closed down at $3,233/mt, down $46/mt, a decrease of 1.4%, with trading volume increasing to 13,404 lots and open interest falling by 3,868 lots to 214,000 lots.

During the Chinese New Year holiday, LME copper was under pressure and pulled back due to Trump's tariff remarks and a continuous increase in LME inventory; subsequently, the US Supreme Court ruled that large-scale tariff hikes were illegal, the US dollar weakened, and short covering pushed prices to rebound quickly above $13,300/mt. Thereafter, under the intertwined influence of progress in US-Iran negotiations and geopolitical tensions, market sentiment swung between bullish and bearish, with LME copper fluctuating within the range of $13,200-13,350/mt. In terms of open interest structure, during the rebound phase, it was mainly characterized by short positions being reduced, and after reaching new highs, there were signs of long positions being cut, indicating a cautious mindset among investors. The continuous accumulation of LME inventory put downward pressure on prices, while domestic transactions had not fully recovered post-holiday, and high prices still suppressed demand. Overall, copper prices lacked unidirectional drivers and were expected to fluctuate at highs in the short term. Fundamentally, domestic inventory increased more than expected during the Chinese New Year holiday, with social inventory in the region breaking through 500,000 mt post-holiday, and slow resumption of operations downstream also led to an accumulation of in-factory inventory, resulting in weak purchasing sentiment. As a result, premiums for domestic trade dropped significantly. Currently, all three markets, LME, COMEX, and SHFE, exhibit a deep Contango structure, reflecting weaker expectations for current demand. Looking ahead to next week, with the lack of unidirectional momentum for copper prices and no resonance between macro and fundamentals, LME copper is expected to fluctuate between $12,800-13,500/mt, and SHFE copper between 98,000-104,000 yuan/mt. In the spot market, after entering the trading period for the SHFE copper 2603 contract, the market maintained a large discount, and the pace of inventory reduction was slow. Spot prices against the SHFE front-month contract are expected to range from a discount of 320 yuan/mt to 140 yuan/mt.

SMM Morning Meeting Minutes: LME copper opened at $13,317/mt overnight, fluctuated rangebound after opening, then touched a low of $13,168/mt, and subsequently the center rose to touch a high of $13,348/mt, finally closing at $13,259/mt, down 0.68%. Trading volume reached 18,000 lots, a decrease of 809 lots from the previous trading day; open interest reached 316,000 lots, a decrease of 4,795 lots from the previous trading day, overall mainly showing bulls reducing positions. The most-traded SHFE copper contract opened at 102,670 yuan/mt overnight, fluctuated downward after opening, then touched a low of 101,780 yuan/mt, and subsequently the center rose to touch a high of 102,880 yuan/mt, finally closing at 102,550 yuan/mt, down 0.15%. Trading volume reached 55,000 lots, a decrease of 51,000 lots from the previous trading day; open interest reached 186,000 lots, an increase of 1,437 lots from the previous trading day, overall mainly showing bears increasing positions.

After the Chinese New Year holiday, the first fundamental indicator to watch post-holiday is undoubtedly inventory! SMM compiles the latest inventory data from three markets (LME, COMEX, SHFE) and the evolving logic for the future outlook.

SMM Morning Meeting Minutes: LME copper opened at $12,967/mt overnight, hitting an early high of $12,984/mt before copper prices fluctuated downward, touching a low of $12,804/mt near the close and finally settling at $12,901/mt, down 0.76%. Trading volume reached 12,000 lots, down 4,963 lots from the previous session, while open interest stood at 318,000 lots, up 327 lots from the previous session, primarily driven by increased bear positions. The most-traded SHFE copper contract was closed overnight due to the Chinese New Year holiday.