Macro Weakness and Limited Fundamental Support, Lead Prices Need to Watch for Pullback Risks [SMM Lead Morning Meeting Summary]

Futures:

Last Friday, LME lead opened at $1,896/mt. In the Asian session, it consolidated on a subdued note; upon entering the European session, it reversed course and rebounded, gradually approaching the $1,900/mt level but failing to hold firm. Finally, LME lead settled at $1,898/mt, up 0.18%, posting a four-day winning streak.

Last Friday, the most-traded SHFE lead 2608 contract opened at 16,045 yuan/mt. Early in the session, buoyed by gains in LME lead, SHFE lead briefly approached 16,100 yuan/mt. However, uncertainty over the sustainability of lead ingot destocking saw SHFE lead pare some gains after the surge, and it consolidated in the latter part of the session. SHFE lead finally settled at 16,030 yuan/mt, up 0.03%; open interest reached 70,447 lots, down 673 lots from the previous trading day.

On the macro front:

US President Trump: Iran agreed to a “perfect deal” yesterday but then turned around and opened fire; Iran’s Revolutionary Guards announced the closure of the Strait of Hormuz; the US military said the southern channel of the Strait of Hormuz remains “open”. In addition, the Fed’s semi-annual report stated that already-strong inflation accelerated further in the spring and that it is prepared to use all available tools to achieve its dual mandate.

:

Last Friday in the lead spot market, SHFE lead continued to consolidate. Suppliers sold as prices moved, but downstream purchases were low and trading was sluggish. In addition, EXW supply from primary lead smelters was ample, with mainstream production areas quoting discounts of 50-0 yuan/mt against the SMM #1 lead average price on an EXW basis. In the secondary lead sector, smelters showed weak willingness to sell; some secondary refined lead was quoted at parity with SMM #1 lead, and a few enterprises even offered premiums of 75 yuan/mt. Approaching the weekend, downstream enterprises had moderate purchase willingness, mainly relying on long-term contract purchases, with only small spot order replenishment.

Inventory: As of July 10, LME lead inventory stood at 289,375 mt, down 2,050 mt from the previous trading day. SHFE weekly lead ingot inventory totaled 70,107 mt, up 858 mt from the previous week.

Today's lead price forecast:

Recently, lead ingot destocking in China, driven by both production cuts at lead smelters and increased downstream cargo pick-up, has provided some support to lead prices. This week, as the SHFE lead 2607 contract approaches delivery, it is likely to drive transfers from factory warehouses to delivery warehouses, making sustained lead ingot destocking difficult. We need to closely monitor the shift from invisible to visible inventory and its impact on lead prices.

Data source statement: All data other than publicly available information is processed by SMM based on public information, market communication, and SMM’s internal database models. They are for reference only and do not constitute any trading recommendations.