Base Metal Fundamental Report

Copper:

• Supply Side: The national social inventory continued to decline over the weekend. As of Monday, March 24, SMM’s mainstream copper inventory decreased by 12,800 metric tons compared to last Thursday and by 15,400 metric tons compared to last Monday. The current inventory levels have raised concerns about Q2 supply.

• Demand Side: Downstream buyers are maintaining a just-in-time purchasing strategy, but interest in purchasing is gradually increasing, showing some positive momentum.

• Prices: Macro and fundamental factors are aligning, supporting copper prices. A further rise in copper prices is expected today.

Aluminium:

• Macro Perspective:

• The US Dollar Index rebounded to 104.31 on Monday, closing 0.16% higher, driven by strong US business activity data for March.

• SHFE aluminium night session showed continued adjustments.

• Aggressive comments from the US Fed’s Bostic and weak PMI data slightly weakened market sentiment.

• Positive domestic macro outlook remains unchanged.

• China’s Finance Minister Lan Fuan stated that fiscal policy in 2025 will be more proactive and sustained.

• The PBOC’s Q1 meeting suggested possible RRR cuts and interest rate reductions, indicating stronger monetary policy support.

• Fiscal measures to boost consumption, such as raising pensions and providing childcare subsidies, are expected to support demand.

• Fundamentals:

• The aluminium industry remains robust.

• The seasonal “Golden March, Silver April” destocking trend is confirmed.

• End-use consumption in sectors like NEVs continues to rise.

• The import window remains closed, and net imports of primary aluminium in Jan-Feb 2025 dropped significantly.

• The domestic import deficit is around 2,600 yuan/metric ton, reducing the willingness of foreign suppliers to clear customs and ship to China.

• SMM expects that in March, domestic primary aluminium imports will mainly rely on long-term contracts, with no significant rise in net imports.

• Continued destocking and domestic policy support will stabilize short-term prices.

• A stronger rally will be needed for SHFE aluminium to reclaim the 21,000 yuan/metric ton level.

Lead:

• Supply:

• Lead smelters in Henan have entered maintenance phases, and other planned maintenance activities are expected to reduce primary lead supply on a monthly basis in April.

• Some smelters in Hunan have cut production due to raw material shortages and environmental issues, though production has not yet been significantly affected.

• Lead prices have declined sharply, reducing smelter profitability, especially with high scrap battery prices.

• Profit margins for secondary lead producers are near the cost line, leading to slight production cuts in key production areas.

• Imported lead has flowed into the domestic market, partially filling the raw material supply gap.

Zinc:

• Supply:

• On March 24, LME zinc inventory dropped by 750 metric tons to 153,650 metric tons (a 0.49% decline).

• LME zinc formed a bullish candlestick overnight without a lower shadow.

• The lower Bollinger Band provided support, while the 20- and 60-day moving averages also supported the price.

• The March US S&P Global Composite PMI exceeded expectations, and the stronger US Dollar Index pressured LME zinc, causing a pullback.

• SHFE zinc recorded a bearish candlestick overnight.

• Domestic social inventory showed a slight decline, but SHFE zinc remained weak under external pressure.

• China’s Finance Ministry’s announcement of a more active fiscal policy in 2025 is expected to provide some support to zinc prices.

Conclusion:

• Copper: Inventory decline is likely to push prices higher.

• Aluminium: Policy support and strong demand will help stabilise prices.

• Lead: Supply cutbacks and imports will help balance the market.

• Zinc: Macro factors and fiscal support will provide stability for prices.