Supply-Side Contraction Eases Inventory Buildup Pressure; Lead Prices Expected to Maintain Consolidation Trend [SMM Lead Morning Summary]

Futures:

Overnight, LME lead opened at $1,890/mt. During the Asian session, it consolidated around $1,890/mt. Entering the European session, the center of LME lead shifted higher, and subsequently it consolidated within a narrow range around $1,900/mt for most of the session, before finally settling at $1,900/mt, up 0.82%.

Overnight, the most-traded SHFE lead 2609 contract opened at 15,840 yuan/mt. After opening, SHFE lead consolidated at highs, moving between 15,835-15,865 yuan/mt for most of the session, before finally settling at 15,840 yuan/mt, up 0.6%. Open interest was 558.46 million lots, down 4,340 lots from the previous trading day.

On the macro front:

PBOC: Maintain the RMB exchange rate basically stable at a reasonable and balanced level, and construct a high-quality bond market "technology board." US President Trump demanded that Iran provide compensation, include it in all future negotiation requirements, and stated that the US military has "100% control" of the Strait of Hormuz; Iran conducted a reshuffle of military commanders, with the Supreme Leader appointing six senior military commanders. Additionally, the US Strategic Petroleum Reserve fell below 300 million barrels for the first time since 1983.

:

Yesterday, in the lead spot market, SHFE lead continued to consolidate on a strong note. Suppliers mostly sold following the market trend, and as delivery neared, there were few warrant cargo quotes in the Jiangsu, Zhejiang, Shanghai area. Additionally, primary lead smelters had ample EXW supply, but quotations in north China were slightly firm. Quotations in mainstream production areas were at premiums of 0-25 yuan/mt against SMM #1 lead average price, ex-works. In terms of secondary lead, as lead prices rebounded, losses in secondary lead were repaired, and some smelters increased shipments. Secondary refined lead quotations were at discounts of 50-0 yuan/mt against SMM #1 lead average price, ex-works, with discounts exceeding 100 yuan in a few regions. Downstream enterprises mostly purchased as needed, but some were cautious of high prices and stayed on the sidelines, or mainly purchased under long-term contracts. Overall spot market transactions showed no significant improvement temporarily.

Inventory: As of Aug 10, LME lead inventory was 421,800 mt, down 2,775 mt from the previous trading day; total SHFE lead ingot warrant inventory was 57,053 mt, up 417 mt from the previous week. SMM lead ingot social inventory across five regions totaled 72,800 mt, up 700 mt from Aug 3 and up 2,200 mt from Aug 6.

Today's lead price forecast:

Recently, some regional primary and secondary lead enterprises underwent maintenance or production cuts, leading to regional supply tightening. And as lead prices rose, downstream enterprises purchased as needed, and inventories in a few lead consumption areas declined slightly, but this did not change the overall trend of inventory increases. Based on the open interest of the SHFE lead front-month contract, it is estimated that the lead ingots planned for delivery have mostly arrived at the warehouses. It is expected that the subsequent increase in social inventory will slow down, reducing the pressure on lead price performance. In the future, more attention should be paid to changes on the supply side.

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, for reference only, and do not constitute any decision-making advice.