Futures:
Overnight, LME lead opened at $1,882.5/mt, drifted lower to a low of $1,875/mt during Asian trading hours before rebounding. Entering European trading hours, bulls pushed LME lead higher, reaching a high of $1,904.5/mt at the close, finally settling at $1,887.5/mt, up 0.35%.
Overnight, the most-traded SHFE lead 2608 contract opened higher with a gap at 15,940 yuan/mt, lightly touching a low of 15,930 yuan/mt at the start of trading. Boosted by the rise in LME lead, SHFE lead rose to 16,110 yuan/mt. Due to poor fundamentals, it gave back some gains at the close, finally settling at 16,030 yuan/mt, up 0.79%.
Macro Front:
The US trade deficit widened to its largest in over a year in May, with imports broadly increasing and exports declining. The PBOC increased gold holdings for the 20th consecutive month. The State Administration for Market Regulation will conduct spot checks on fair competition reviews. China's foreign exchange reserves in June stood at $3,416.262 billion. PBOC Governor Pan Gongsheng stated that the State Administration of Foreign Exchange will continue to increase the proportion of asset allocation in Hong Kong. The PBOC and two other departments welcomed the China Foreign Exchange Trade System and Hong Kong Exchanges (HKEX) to co-build Hong Kong's electronic fixed income and currency trading platform.
Spot Fundamentals:
SHFE lead consolidated on a subdued note. Suppliers sold as the market moved, with transactions mostly at small discounts. Meanwhile, EXW cargoes from primary lead smelters were generally traded at discounts, with quotations in mainstream production areas from a discount of 25 yuan/mt to a premium of 25 yuan/mt against the SMM #1 lead average price. For secondary lead, smelters had many production cuts and shutdowns, resulting in limited market supply. Secondary refined lead quotations remained near parity against the SMM #1 lead price. Downstream enterprises were not very active in purchasing, with some mainly relying on long-term contracts and others only making just-in-time procurement, so spot market trading activity was average.
Inventory: On July 7, LME lead inventory decreased by 200 mt to 292,075 mt. As of July 6, SMM lead ingot social inventory across five regions totaled 70,200 mt, a decrease of 2,300 mt from July 2.
Today's Lead Price Forecast:
Demand side, the off-season trend persisted in July. After large enterprises resolved the factors of semi-annual inventory counting and account closing, they resumed regular procurement, bringing some purchasing expectations. Supply side, primary lead enterprises are about to resume after maintenance, shifting supply expectations to an increase, while secondary lead enterprises remained in a state of production cuts, with regional supply limitations. Overall, lead prices are expected to remain in the doldrums in the short term.
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