Social Inventory Still Faces Inventory Buildup Risk, Be Wary of Its Drag on Lead Prices [SMM Lead Morning Meeting Notes]

Futures:

Overnight, LME lead opened at $1,892.5/mt, drifting lower during the Asian session. Entering the European session, LME lead initially dipped before rebounding, touching a low of $1,880/mt before quickly surging to a high of $1,897/mt. It weakened near the close due to increased bearish positioning, ultimately closing at $1,884.5/mt, a decline of 0.29%.

Overnight, the most-traded SHFE lead 2609 contract opened higher with a gap at 15,700 yuan/mt, briefly touching a high of 15,760 yuan/mt early in the session. Due to bear position lightening, SHFE lead drifted lower, touching a low of 15,665 yuan/mt near the close, and finally settled at 15,680 yuan/mt, a gain of 0.19%.

On the macro front:

On Thursday, it was reported that Iran's proposed Hormuz navigation agreement would ban the passage of hostile vessels. Meanwhile, as the market awaits guidance from non-farm payrolls data, a growing number of US Fed officials are talking about the option of near-term interest rate hikes. The US dollar index rebounded, momentarily reclaiming the 100 mark, and finally closed up 0.24% at 99.94. US Treasury yields rose across the board, with the benchmark 10-year yield near flat, closing at 4.679%; the 2-year US Treasury yield, which is sensitive to the Fed's policy rate, closed at 4.258%. The DRC banned the export of copper concentrates and cobalt concentrates. World Gold Council: Looking ahead, a second wave of high inflation similar to the late 1970s cannot be ruled out, though this does not inherently imply a significant rise in gold.

China Gold Association: China's gold production fell 14.62% YoY in H1 2026, while consumption grew 1.23%. DeepSeek plans to raise the overall pricing of its API services in the near term, with the increase expected to be substantial.

Spot fundamentals:

SHFE lead lacked upward momentum and maintained a consolidative trend. Suppliers held prices firm when selling, but downstream purchasing enthusiasm declined from yesterday, with spot market transactions weakening in some regions. Currently, a north-south price divergence persists for primary lead smelters' shipments; mainstream producing areas quoted at premiums of 0-50 yuan/mt over the SMM #1 lead average price ex-factory, with actual transactions near parity. For secondary lead, smelters sold flexibly, with secondary refined lead quoted at discounts of 50-0 yuan/mt against the SMM #1 lead average price ex-factory, widening from yesterday's discount level. Among downstream enterprises, some made just-in-time procurement, dampening overall market trading activity.

Inventory: On August 6, LME lead inventory decreased by 3,125 mt to 428,425 mt. According to SMM, as of August 6, total social inventory of SMM lead ingots across five regions reached 70,600 mt, up 2,100 mt from July 30, but down 1,500 mt from August 3.

Lead Price Forecast for Today:

At the start of the week, lead prices plunged to their lowest in over three years, heightening risk-averse sentiment in the spot market. Lead smelters generally held back from selling at low prices, while downstream enterprises showed a mix of caution on fears of further declines and dip-buying. As smelters held back from selling and market supply tightened, some downstream enterprises turned to sourcing from social warehouses, driving a decline in social inventory of lead ingots during the week. However, as the SHFE lead front-month contract approached delivery, some delivery brand cargo continued moving to delivery warehouses, posing a risk of further social inventory buildup, which could weigh on lead prices. Moving into mid-to-late August, attention should also be paid to the maintenance progress at primary lead smelters and its impact on lead ingot social inventory.