Energy Supply Pressures and Lead Ingot Inventory Buildup Coexist Lead Prices May Continue to Consolidate [SMM Lead Morning Meeting Summary]

Futures:

On Friday, LME lead opened at $1,977.5/mt. During the Asian trading session, LME lead fluctuated upward and attempted to approach $2,000. However, as geopolitical tensions overseas escalated, market risk aversion sentiment increased, causing LME lead to gradually give up its gains from the Asian session. The decline intensified overnight, with the lowest point reaching $1,958/mt. It finally closed at $1,960/mt, a decrease of 0.96%.

On Friday, the most-traded SHFE lead 2604 contract opened at 16,805 yuan/mt. At the beginning of the session, it was boosted by positive domestic macroeconomic sentiment, rising to 16,910 yuan/mt. However, as LME lead's decline expanded and domestic lead ingot inventory buildup pressure increased, SHFE lead reversed course and pulled back, closing at 16,770 yuan/mt, down 0.12%. Open interest reached 64,813 lots, an increase of 969 lots from the previous trading day.

On the macro front:

According to Xinhua News Agency, the Political Bureau of the Communist Party of China Central Committee held a meeting to discuss the draft outline of the 15th Five-Year Plan and the government work report. On March 1, the US military claimed to have destroyed the headquarters of Iran's Islamic Revolutionary Guard Corps, stating that the operation did not involve nuclear facilities and denying that the "Lincoln" aircraft carrier had been hit by Iran. Trump: Military action against Iran may last about four weeks, and the Iranian naval headquarters has been largely destroyed; Iran claims that its counterattack resulted in 560 US casualties and the downing of over twenty US and Israeli drones. The interim leadership committee in Iran began operations, and the Iranian foreign minister stated there are no plans to block the Strait of Hormuz. A joint statement from the UK, France, and Germany: They may take "necessary defensive actions" against Iran.

In the spot lead market on Friday, SHFE lead maintained a consolidating trend. With cargoes yet to flow out after delivery, available supply in Jiangsu, Zhejiang, and Shanghai was limited. Suppliers followed the market for shipments, with a few offering premiums. Others mainly shipped electrolytic lead directly from production sites. Mainstream origin quotations were -25~+25 yuan/mt against the SMM #1 lead price. Additionally, secondary lead enterprises slightly increased their shipments, with secondary refined lead quotations ranging from -50~0 yuan/mt against the SMM #1 lead average price. Downstream enterprises showed moderate inquiry enthusiasm, making only just-in-time procurement, leading to a sluggish spot order market.

Inventory: As of February 27, LME lead inventory decreased by 200 mt to 286,100 mt. SHFE lead ingot inventory totaled 64,667 mt, an increase of 8,128 mt from the previous week. SMM's five-region social inventory of lead ingots continued to rise, reaching a five-month high.

Today's lead price forecast:

As geopolitical tensions in the Middle East escalate and major maritime routes are blocked, transportation costs are expected to rise, and pressure on European energy supplies is anticipated to increase. After the holiday, the domestic lead market experienced a significant inventory buildup, with both smelter and social warehouse inventories rising simultaneously, becoming the main factor dragging down lead prices. Notably, scrap battery prices have been on the rise post-holiday, leading to increased losses for secondary lead, and some smelters have delayed their resumption plans, which is expected to ease the pressure of lead ingot inventory buildup. Meanwhile, as downstream enterprises resume operations, attention should be paid to the recovery in lead consumption and its impact on lead inventory digestion.

Data source statement: Apart from publicly available information, other data are derived from public information, market communication, and SMM's internal database model, processed by SMM for reference only and do not constitute decision-making advice.