Secondary Lead and Primary Lead Inverted by 100 Yuan, Lead Price Stop-Falling Signal Emerges? [SMM Lead Morning Brief]

Futures:

Overnight, LME lead opened at $1,916.5/mt. Weighed down by bearish macro sentiment, LME lead remained in the doldrums, with its trading center shifting further lower. It dipped dangerously close to the $1,900/mt mark twice, hitting an intraday low of $1,906/mt—a nearly three-month low. LME lead eventually settled at $1,912.5/mt, down 0.05%.

Overnight, the most-traded SHFE lead 2608 contract opened at 16,205 yuan/mt. Early in the session, dragged by the decline in LME lead, SHFE lead once again tested the 16,200 yuan/mt level. Subsequently, as the impact of bearish macro news faded, SHFE lead gradually rebounded in the doldrums, approaching the 16,300 yuan/mt area. By the close, it settled at 16,270 yuan/mt, up 0.25%. Its open interest stood at 82,716 lots, down 994 lots from the previous trading day.

Macro front:

Key events: Renewed tensions in the Strait of Hormuz: Iran was reportedly seeking $40 billion annually for passage rights, and evacuation operations were suspended after a vessel was attacked. Following the US-Iran agreement, war risk insurance premiums for the Strait of Hormuz were halved, falling from 5% to 2%. Economic data: The final reading of US Q1 GDP was revised up to 2.1%, but weakening consumption poses hidden concerns. The US May PCE price index rose 4.1% YoY, while the core PCE rose 3.4% YoY, hitting a three-year high. US May durable goods orders fell 4.5% MoM, the largest drop in nearly a year, though core capital goods data surprisingly surged 1.6%. Fed Vice Chairman Williams stated that current interest rates are sufficient to curb inflation, with a return to the 2% target expected by 2028.

:

Spot market, SHFE lead’s trading center shifted further lower. Some suppliers rolled over positions for contract rollover, with quotes still at small premiums. Meanwhile, primary lead smelters showed increased reluctance to sell at low prices, and suppliers’ quotes for discounts also narrowed. Mainstream producing regions were quoted at discounts of 70-0 yuan/mt against the SMM #1 lead average price, with some areas quoted at a premium of 100 yuan/mt or smelters halting shipments. In the secondary lead sector, smelters generally held back from selling at low prices, with few quotes. A small number of spot orders for secondary refined lead maintained quotes ex-factory at a premium of 25 yuan/mt against the SMM #1 lead average price. Downstream enterprises, wary of falling prices, exhibited strong wait-and-see sentiment. Some awaited new long-term contracts, with few inquiries for spot orders. Spot market trading was quiet.

Inventory side: As of June 25, LME lead inventory stood at 298,525 mt, down 1,125 mt from the previous trading day. SHFE lead warrant inventory totaled 62,656 mt, unchanged from the previous trading day. SMM lead ingot social inventory across five regions totaled 67,500 mt, down 1,300 mt from June 22.

Lead price forecast:

Lead prices recently fell consecutively. Losses at secondary lead enterprises widened, and their shipments decreased markedly. In contrast, on the primary lead front, smelters and suppliers generally shipped actively, selling at widening discounts. During this period, secondary lead and primary lead formed an inverted structure, with the price spread between the two reaching 100 yuan/mt, providing some support for lead prices. It should be noted, however, that as it is currently the semi-annual period in June and near the month-end, large downstream enterprises are conducting mid-year account closing and inventory checks, resulting in procurement suspensions or postponements to July. This situation is expected to last until the end of June, with lead prices continuing to be in the doldrums.

Data source statement: All data other than publicly available information are processed by SMM based on public information, market communication, and SMM's internal database models, and are for reference only, not constituting any decision-making advice.