Pre-Holiday Market Trading Weakens, Lead Prices Expected to Continue in the Doldrums [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $1,969/mt. Market trading was sluggish, and the price consolidated throughout the day, with the decline slowing compared to the previous session. It mostly fluctuated between $1,960-1,980/mt, eventually closing at $1,961.5/mt, down 0.46%, marking the sixth consecutive negative session.

Overnight, the most-traded SHFE lead 2603 contract opened at 16,640 yuan/mt. With losses in secondary lead and weak consumption coexisting, long and short positions were in a stalemate during the session, and SHFE lead consolidated within a narrow range. It mostly traded between 16,600-16,650 yuan/mt, eventually closing at 16,615 yuan/mt, down 0.15%. Open interest increased by 2,252 lots to 57,001 lots compared to the previous trading day.

On the macro front:

The Central Committee of the Communist Party of China and the State Council issued opinions on anchoring agricultural and rural modernization and solidly advancing the comprehensive revitalization of rural areas. The US House of Representatives passed a funding agreement negotiated by President Trump and Senate Democrats, potentially ending a partial US government shutdown. Additionally, the China Nonferrous Metals Industry Association (CNIA) is studying the inclusion of "copper concentrates" in national reserves.

:

In the lead spot market yesterday, lead prices continued to be in the doldrums. Suppliers sold goods following the market trend. Warrant cargo quotations remained firm, while quotations for primary lead ingot cargoes self-picked up from production sites showed divergence. Some smelters in south China implemented production cuts, and their quotations turned to premiums. However, supply was ample in the northern regions, and quotations continued at discounts. Main producing area quotations against the SMM #1 lead average price were at discounts of 50 yuan/mt to premiums of 50 yuan/mt ex-works. In the secondary lead sector, losses widened, and smelter quotations decreased significantly. Some secondary refined lead quotations against the SMM #1 lead average price were at discounts of 50 yuan/mt to premiums of 50 yuan/mt ex-works, resulting in an inverted price spread between primary lead and secondary lead. Downstream enterprises only made just-in-time procurement, with few inquiries. Some traders were willing to accept heavily discounted cargoes. Trading in the spot market was sluggish.

Inventory: As of February 3, LME lead inventory surged by 28,775 mt to 23,285 mt. SMM lead ingot social inventory across five regions continued its upward trend and reached a two-month high.

Today's lead price forecast:

Recently, the Chinese New Year atmosphere intensified in the lead market. Downstream lead-acid battery enterprises gradually prepared for work stoppages and holidays, leading to decreased trading activity in the lead market and weighing on lead prices, which continued their weak and fluctuating trend. However, it is worth noting that after the decline in lead prices, raw material prices such as scrap batteries remained high. Losses for secondary lead enterprises widened, and some smelters had already cut production or halted operations for the holidays, leading to a relative tightening of supply. Operating enterprises narrowed the discounts on secondary lead quotations. In some regions, secondary refined lead prices inverted against primary lead prices, which may provide some support for lead prices. In the short term, both lead supply and demand are declining, and lead prices will maintain a weak consolidation trend.

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