Geopolitical Risks Continue to Escalate; Lead Prices Remain Under Pressure, Fluctuate, and Pull Back [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $1,967.5/mt. During the Asian session, LME lead moved relatively steadily, consolidating around $1,970/mt for most of the time. As overseas geopolitical risks continued to escalate, the US dollar index rose and approached 100, and base metals generally fell during the European session. The center of LME lead trading shifted down to around $1,950/mt, and it fell further to $1,927/mt in the night session, hitting a nearly 10-month low. It finally closed at $1,936.5/mt, down 1.25%.

Overnight, affected by the decline in LME lead, the most-traded SHFE lead 2604 contract opened lower at 16,780 yuan/mt. Thereafter, the tug-of-war between longs and shorts intensified. In China, post-holiday inventory buildup of lead ingots coexisted with expectations for a recovery in lead consumption. In the latter half of the trading session, SHFE lead mostly traded between 16,750-16,800 yuan/mt, and finally closed at 16,790 yuan/mt, down 0.68%; its open interest fell to 59,895 lots, down 320 lots from the previous trading day.

On the macro front:

Trump ordered a two-pronged effort to safeguard shipping in the Gulf region, while Iran warned vessels not to pass through the Strait of Hormuz. Meanwhile, Qatar continued to shut down the world’s largest LNG plant, and European natural gas surged another 32%. Iraq’s daily production cuts may have reached 3 million barrels. The renewed US-Iran conflict reignited “inflation concerns,” and the probability of a second US Fed interest rate cut within the year fell to 50%. New York Fed’s Williams: further interest rate cuts depend on inflation progress, and the impact of tariffs is a “one-off shock.” Voting member and Minneapolis Fed President: the shadow of war looms over the economic outlook, and the US Fed can stay put.

:

In yesterday’s lead spot market, SHFE lead held up well. Suppliers shipped in line with the market, and as suppliers differed significantly in their willingness to ship, quotation disparities widened. In particular, the price spread for cargoes self-picked up from production site at primary lead smelters widened, with mainstream producing areas quoted at discounts of 25 yuan/mt to premiums of 75 yuan/mt against the SMM #1 lead average price, ex-works. Meanwhile, shipments from secondary lead smelters increased, and discounts for secondary refined lead widened to discounts of 100-0 yuan/mt against the SMM #1 lead average price, ex-works. Downstream enterprises mainly made just-in-time procurement. Some, due to higher lead prices, showed strong wait-and-see sentiment; their inquiry activity weakened from yesterday, and spot market transactions turned sluggish.

Inventory: As of March 3, LME lead inventory was flat at 286,100 mt; SHFE lead ingot warrant inventory stood at 54,888 mt, down 41 mt from yesterday; this week, SMM five-region social inventory of lead ingots reversed course and edged down, but still remained at a five-month high.

Lead price forecast for today:

Overseas geopolitical tensions remained unchanged, supply chain pressures were relatively high, and damage to the economic environment weighed on base metals, which generally weakened. As the Chinese market is in the post–Chinese New Year work-resumption period, a recovery in lead consumption may drive destocking of lead ingot inventory, with fundamentals expectations slightly stronger than in overseas markets; lead prices have therefore also been relatively more resilient than overseas. However, it is worth noting that the SHFE/LME price ratio has widened, improving lead ingot import profitability and raising expectations for lead ingot imports. Meanwhile, domestic smelters are gradually resuming operations, and ample supply has widened spot discounts for spot lead. Lead prices are expected to remain in the doldrums with a fluctuating trend in the short term.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and SMM’s internal database models, and are for reference only and do not constitute decision-making advice.