Tight Supply of Primary Lead & Loosening Supply of Secondary Lead, Lead Prices Remain Stalemated at High Levels [SMM Lead Morning Meeting Minutes]

Futures:

Last Friday, LME lead 3M contract shot up and retreated on September 4, opening at $1,902.5/mt. It moved sideways at low levels during Asian trading hours, then climbed during European trading hours. During the overlapping European and US sessions, it briefly surged to $1,916.0/mt, approaching the upper Bollinger Band before encountering resistance and pulling back. It eventually closed at $1,906.5/mt, down $0.5/mt or 0.03% from the previous trading day's closing price. The full-day trading range was $1,902.5-1,916.0/mt, with volume of 6,536 lots and open interest of 170,497 lots. The daily candlestick closed as a small bullish candle with a long upper shadow.

Last Friday, SHFE lead 2610 contract opened at 16,160 yuan/mt in the night session. After briefly dipping to 16,115 yuan/mt at the open, it consolidated higher, touching 16,180 yuan/mt intraday before pulling back to close at 16,130 yuan/mt, flat with the previous trading day's closing price. Night session volume was 19,303 lots, with open interest of 65,132 lots. The daily candlestick closed as a small bearish candle, moving sideways for multiple consecutive days, with prices still holding above the middle Bollinger Band and the 16,000 yuan mark.

Overall, SHFE and LME lead moved in high synchronization, both encountering resistance near the upper Bollinger Band and previous highs before pulling back at the end of the session. However, both still held above the middle Bollinger Band, with SHFE lead holding the 16,000 yuan level. The sideways structure remained intact, and direction still awaits fundamental and LME catalysts.

On the macro front:

Overseas: US August nonfarm payrolls increased by 162,000, nearly three times market expectations, pushing market bets on a September Fed rate hike to nearly 60%. Strong employment and hawkish rhetoric boosted the US dollar, with the US dollar index closing up 0.168% at 99.16. The 2-year US Treasury yield touched 4.42% intraday, a new high since January 2025. Middle East tensions remained elevated, while Russia and Ukraine reached a "three-day ceasefire" and the US and Russia advanced next-stage negotiations, creating mixed geopolitical signals. Today, US and Canadian stock markets are closed for Labor Day, and CME precious metals and crude oil closed early on the morning of the 8th.

China: The central bank will conduct 500 billion yuan in outright reverse repo operations today to maintain reasonably ample liquidity. Eight central financial enterprises plan to increase capital by 360 billion yuan to supplement capital, with the Ministry of Finance issuing special government bonds to support this. MIIT issued the "AI Small and Medium-Sized Enterprise Entrepreneurship Support Plan (2026-2028)", and seven departments jointly issued a digital-green coordinated transformation plan. In August, China's logistics demand maintained expansion, with business sentiment further improving. Qatari Prime Minister and Foreign Minister Mohammed will visit China.

Spot fundamentals:

Last Friday, SMM #1 lead average price fell 25 yuan/mt. Primary lead supply remained tight, with limited circulation of EXW cargoes. Suppliers quoted premiums in line with market conditions, with mainstream production areas quoting premiums of 0-50 yuan/mt against SMM #1 lead average price. Regional divergence was evident: Henan smelters had limited inventory, with spot orders including some pre-sales; Hunan inventory continued to decline, with some smelters sold out and suspending quotes; Jiangxi and Anhui premiums were 80-100 yuan/mt. Secondary lead supply marginally loosened, with increased circulating cargoes. Secondary refined lead was quoted at discounts of 100-50 yuan/mt against SMM #1 lead average price, with a few as low as 175 yuan/mt, widening discounts. Downstream demand was steady but weak, with enterprises producing based on sales and mainly purchasing on demand and through long-term contracts. Transactions were concentrated in EXW cargoes from smelters, with moderate regional transaction activity.

Inventory: As of September 4, LME lead inventory stood at 391,975 mt, down 4,850 mt from the previous trading day; total SHFE lead ingot warrant inventory was 57,742 mt, down 51 mt from the previous trading day.

Lead price forecast for today:

On Friday, SHFE and LME both met resistance near the upper Bollinger Band and previous highs. SHFE lead consolidated firmly but lacked upward momentum, holding above the 16,000 mark. Overseas LME inventory continued to decline, domestic primary lead EXW supply remained tight, and suppliers held prices firm, providing support below lead prices. Domestic secondary refined lead discounts widened and circulating supply increased, while downstream maintained purchases based on demand and long-term contracts, limiting room for a rebound in lead prices. Spot lead prices are expected to continue moving sideways at high levels today. Attention should be paid to the diversion of primary lead demand caused by widening secondary refined lead discounts, the sustainability of primary lead price firmness amid maintenance and low inventory, and changes in actual downstream purchasing.