Outside China Inventory Buildup Bearishness Exhausted, Future Lead Price Trend Needs More Attention on Domestic Developments [SMM Weekly Lead Price Forecast]

           Next week, key macroeconomic data will include US June housing starts, building permits, industrial production, and the University of Michigan consumer sentiment index, which will influence market expectations for the Fed's rate path. Meanwhile, the ongoing Middle East geopolitical conflict continues to escalate, with shipping volume through the Strait of Hormuz falling to about one-tenth of pre-war levels. Geopolitical risks have pushed oil prices higher, raising supply-chain cost expectations.

LME lead, within the week LME lead inventory surged by 160,000 mt, sparking risk-off sentiment and driving LME lead to its lowest level in over a year. As lead prices fell, the LME lead Cash-3M spread remained in a deep contango, with the latest quote at -$43.83/mt. Moreover, heightened uncertainty over the Middle East conflict, along with rising energy and shipping costs, may become another factor affecting lead prices. Once the inventory buildup news is digested by the market, lead prices are expected to get a breather. Next week, LME lead is expected to trade at $1,850-1,905/mt.

SHFE lead, visible lead ingot inventories first increased then declined this week due to delivery factors and downstream purchasing. After the bearish news of overseas inventory buildup ran its course, market attention in China shifted to the production dynamics of secondary lead enterprises and downstream purchasing trends. If lead ingot inventories continue to destock, lead prices are expected to return to 16,000 yuan/mt. The most-traded SHFE lead contract is expected to trade at 15,600-16,150 yuan/mt next week.

Spot lead price forecast: 15,650-15,950 yuan/mt. Consumption side, the lead-acid battery market remains in the off-season, with downstream enterprises continuing to purchase as needed. However, as lead ingots re-enter the circulation market after delivery, downstream cargo pick-up is expected to increase. Supply side, secondary lead enterprises maintain low operating rates, with limited supply circulating in the market, while primary lead supply is relatively ample. The spot market is expected to continue trading at a discount.