Copper prices fluctuated downward this week. Early in the week, as the situation in the Middle East continued to escalate, expectations of a US-Iran conflict intensified. Risk-off sentiment rose, the US dollar index strengthened, and funds rotated back from risk assets. LME copper pulled back from around $13,400 to the $13,000 level, while SHFE copper also pulled back from above 103,000 yuan to around 101,000 yuan. Although the situation was briefly digested by the market and a short-lived pullback in the US dollar drove a technical rebound in copper prices, overall momentum remained limited. US ADP employment data came in better than expected; divisions within the US Fed over interest rate cuts persisted; and the White House’s nomination of Warsh as Fed Chairman also increased policy uncertainty. In terms of positioning, bulls reduced positions for several days, indicating continued exits by high-level funds. Overall, macro uncertainty and a stronger US dollar capped the rebound in copper prices, and prices remained in the doldrums in the short term. Fundamentals, as the market held expectations for higher sulphuric acid prices, the transaction center for copper concentrates was pushed further lower. Recent mine tender prices pointed to a midpoint of -$50/mt. Smelting pressure increased further. For copper cathode, post-holiday inventory buildup continued, and consumption remained sluggish with no sign of a destocking inflection point. LME, COMEX, and SHFE all showed a contango structure, leaving fewer trading opportunities. Looking ahead to next week, geopolitical tensions are expected to continue providing strong support to the US dollar, leaving copper prices facing significant resistance in the short term. Coupled with the current high-inventory fundamentals, an upside move will be difficult. LME copper is expected to fluctuate between $12,800-13,200/mt, and SHFE copper between 98,000-101,000 yuan/mt. In the spot market, as delivery approaches, spot market trading logic will fluctuate with the price spread between futures contracts and funding costs, and is expected to gradually lift next week. Spot prices against the SHFE copper front-month contract are expected to range from a discount of 120 yuan/mt to a premium of 20 yuan/mt.

Today, the most-traded BC copper 2604 contract opened at 89,120 yuan/mt. Early in the session, the center maintained a fluctuating downward trend, hit bottom at 88,620 yuan/mt, then fluctuated upward to a high of 90,020 yuan/mt, and finally closed at 89,530 yuan/mt, down 0.41%. Open interest fell to 6,039 lots, down 89 lots from the previous trading day, while trading volume fell to 4,556 lots, down 1,782 lots from the previous session. On the macro front, Iran said it was willing to abandon its nuclear program in exchange for a “satisfactory alternative” from the US, while also cracking down on separatist forces at home; meanwhile, the US military was reported to have begun preparations for actions against Iran that could last through September. Trump explicitly opposed Khamenei’s son succeeding as Supreme Leader and encouraged the Kurds to pressure Iran, saying that although Iran was trying to seek an agreement, it had missed its chance. The escalation in the Middle East again pushed risk-off sentiment higher, the US dollar index strengthened again, and this was bearish for copper prices. On the fundamentals side, imported supply continued to arrive, and with domestic social inventory at a high level, overall market circulating supply remained ample. Demand side, enterprises resumed work and production, and together with the pullback in copper prices, downstream purchase willingness continued to recover. The SHFE copper 2604 contract closed at 101,050 yuan/mt. Based on the BC copper 2604 contract at 89,530 yuan/mt, its after-tax price was 101,169 yuan/mt. The price spread between the SHFE copper 2604 contract and BC copper was -119 yuan/mt. The spread remained in backwardation and narrowed somewhat from the previous day.

[SMM Shanghai Spot Copper] Looking ahead to next week, spot discounts for Shanghai spot copper are expected to continue a steady recovery. From the market structure perspective, the price spread between futures contracts for the next-month C contract remained around 300 yuan/mt, prompting suppliers to hold prices firm and withhold sales. Meanwhile, the downward shift in the center of copper prices effectively stimulated downstream purchase willingness, driving a notable rise in spot premiums. Supply side, domestic copper and previously price-locked imported cargo continued to arrive, and with social inventory at elevated levels, overall circulating supply in the market remained ample. Under the combined effects of suppliers holding prices firm and downstream buying the dip, the momentum for the recovery in spot discounts is expected to continue.

SMM Morning Meeting Minutes: Overnight, LME copper opened at $12,960/mt. It fluctuated downward in early trading, dipping to $12,792/mt, after which the center of copper prices gradually moved higher and touched a high of $12,966/mt. It then fluctuated downward and finally closed at $12,859/mt, down 1.29%. Trading volume rose to 27,900 lots, and open interest rose to 305,000 lots, down 953 lots from the previous trading day, mainly due to long position reductions. Overnight, the most-traded SHFE copper 2604 contract opened at 100,440 yuan/mt. It fluctuated downward in early trading and bottomed at 100,030 yuan/mt, after which the center of copper prices moved sharply higher and climbed to 101,410 yuan/mt. It finally closed at 100,980 yuan/mt, down 0.35%. Trading volume rose to 74,300 lots, and open interest rose to 195,000 lots, down 5,732 lots from the previous trading day, mainly due to long position reductions.

[Geopolitical Tensions Disrupted the Market, With SHFE and LME Closing Lower Over the Week] At the beginning of the week, continued overseas destocking supported a higher center for LME zinc; subsequently, as geopolitical tensions fueled inflation concerns, a stronger US dollar pressured the base metals sector, and LME zinc retreated after rapid rise, with its center moving lower......

Next week, key macroeconomic data releases include China’s February CPI y/y, the US February non-seasonally adjusted CPI y/y, the US January core PCE price index y/y, and the preliminary US March one-year inflation expectations; meanwhile, geopolitical tensions in the Middle East persist, with unchanged impacts on maritime shipping and energy supply, while a surge in oil prices has hit interest rate cut expectations, and US Treasury traders have increasingly expected that the US Fed will not cut interest rates this year. In addition, on March 6, SHFE officially announced the passage of the revision plan for lead futures contracts, with secondary lead substitutes at a discount of 150 yuan/mt to deliverable-grade material. LME lead, overseas geopolitical issues have mixed bullish and bearish impacts on the lead market: on the one hand, hindered transportation and rising energy prices such as natural gas have pushed up smelting cost, and lead-acid battery exports have also been constrained by transportation restrictions; on the other hand, there is the impact of damage to the economic environment. In addition, overseas lead inventory has remained elevated after surging by more than 50,000 mt during the Chinese New Year period, leaving lead prices under pressure. LME lead is expected to trade at $1,930-1,990/mt next week. SHFE lead, in March, both domestic lead ingot supply and demand increased, and with imported lead supplementing supply, the destocking speed of lead ingots has been slow, leaving insufficient momentum for lead prices to rise. The secondary lead segment is currently in a loss-making state, and some smelters have slowed the pace of resuming production, providing support for lead prices. In addition, next week is the week before delivery for the SHFE lead 2603 contract, and suppliers will transfer inventory and ship to delivery warehouse; expectations of a cumulative increase in visible inventory may weigh on lead prices. Overall, the most-traded SHFE lead contract is expected to trade at 16,600-17,000 yuan/mt next week. Spot price forecast: 16,500-16,700 yuan/mt. Demand side, the operating rate of lead-acid battery enterprises rose, and their lead ingot purchases will rise accordingly, with more expectations of purchasing as needed. Supply side, primary lead smelters’ production was steady to slightly higher, and market circulating supply was ample; however, considering the factor of shipping to delivery warehouse, this may ease suppliers’ pressure to make shipments, keeping spot discounts stable, while secondary refined lead smelters have resumed work at a slightly slower pace and, amid losses, secondary refined lead smelters will hold prices firm in shipments, with limited widening of discounts.

Today, in North China, spot #1 copper cathode prices against the front-month contract were at a discount of 250–130 yuan/mt. The average premium/discount rose by 90 yuan/mt from the previous trading day, while the average transaction price was 100,845 yuan/mt, down 455 yuan/mt from the previous trading day.

[SHFE/LME Price Ratio Rebounded and Hovered Around 7.4]: This week, the SHFE/LME price ratio rebounded and fluctuated around just below 7.4, and the zinc ingot import window remained closed. Overseas, continued destocking supported the upward shift in the center of LME zinc; subsequently, as geopolitical developments fueled inflation concerns, a stronger US dollar pressured the base metals sector, and LME zinc retreated after rapid rise, with its center moving lower.

SMM, March 6: In early trading, SHFE aluminum 2602 fluctuated upward, while the price center fell sharply from the previous trading day. Downstream processing enterprises were bullish on the aluminum price outlook and proactively restocked, with relatively strong willingness to purchase; traders mainly focused on monetizing shipments and reducing open interest. Today’s market transactions were at the average price to 30 yuan/mt. Today, the east China market shipments sentiment index was 3.11, up 0.13 MoM; the purchasing sentiment index was 2.76, down 0.2 MoM. The direction of geopolitical tailwinds remained unclear, and aluminum prices stopped rising and pulled back in the short term. In the central China market, traders remained strongly bullish and tended to take the opportunity to purchase at lower prices, while suppliers were mainly on the sidelines with low willingness to sell. Circulating supply was relatively tight, driving premiums to continue rising. Quotes climbed from a premium of 20 yuan/mt over the central China price before the open to a premium of 50 yuan/mt over the central China price, while the final mainstream transaction prices were around a premium of 20–30 yuan/mt over the central China price. Today, the central China market shipments sentiment index was 2.66, down 0.1 MoM; the purchasing sentiment index was 2.41, up 0.01 MoM. Inventory side, today’s aluminum ingot inventory in major consumption areas increased by 2,000 mt MoM, with the inventory buildup mainly coming from Wuxi and Guangdong. In the short term, after the Chinese New Year, aluminum ingots continued to see seasonal inventory buildup; influenced by bullish sentiment, premiums were expected to remain on a narrowing trend.

Nickel prices came under pressure and pulled back this week. Early in the week, rumors of tighter approvals for RKAB on the Indonesian ore side spurred the futures market to rally briefly, but it later retreated as US Fed officials repeatedly delivered hawkish remarks, the US dollar index held above 106, and global risk assets came under broad pressure. With tensions in the Middle East rising, macro risk-off sentiment strengthened, and nickel prices on SHFE and LME corrected notably. The most-traded SHFE nickel contract closed at 137,140 yuan/mt on Friday, down 1.6% on the week. The LME nickel 3M contract fluctuated between $17,000-17,900/mt this week, with a weekly decline of 2%. In the spot market, the weekly average price of SMM #1 refined nickel was 140,600 yuan/mt, down 2,150 yuan/mt WoW. The weekly average Jinchuan nickel premium was 6,900 yuan/mt, down 1,100 yuan/mt versus the week before Chinese New Year. Premiums for mainstream domestic brands of electrodeposited nickel ranged from -400-400 yuan/mt. After nickel prices fell this week, downstream restocking driven by rigid demand became more evident, and overall spot nickel plate shipments increased WoW. On the macro front, US ADP employment in February increased by 63,000, the largest rise since November 2025 and above the market expectation of 50,000, weakening expectations for US Fed interest rate cuts. Meanwhile, US January PCE and core PCE inflation data rose above expectations, and the US dollar index rebounded, creating short-term pressure on base metal prices. Geopolitical tensions continued to escalate this week, with Iran announcing the closure of the Strait of Hormuz, posing a potential threat to the sulfur supply chain. Domestically, the Two Sessions emphasized medium and long-term benefits from national defense spending, improving expectations for alloy demand in sectors such as defense industry and shipbuilding, which supported nickel alloy consumption. Inventory: Shanghai Bonded Zone inventory was about 2,200 mt this week, flat WoW. Domestic social inventory was about 85,000 mt, with an inventory buildup of about 8,000 mt WoW. Nickel prices are currently in a stalemate, with firmer cost support but unchanged near-term pressure. Tighter Indonesian RKAB quotas and tight nickel ore supply provided strong support for nickel prices, but levels above 140,000 yuan/mt faced strong resistance from high inventory and weak demand. The core expected trading range for the most-traded SHFE nickel contract next week is 130,000-140,000 yuan/mt.