SHFE and LME weaken in tandem, breaking the consolidation pattern; lead prices under pressure [SMM Lead Morning Meeting Summary]

Futures:

Last Friday, the LME lead 3M contract drifted lower on September 11, opening at $1,901.0/mt and closing at $1,892.5/mt, down $8.0/mt or 0.42% from the previous trading day's closing price. The intraday range was $1,891.0-1,904.0/mt, with volume of 5,692 lots, a decline, and open interest of 171,247 lots, up 1,738 lots, forming a bearish daily candlestick.

Last Friday, the SHFE lead 2610 contract opened at 16,120 yuan/mt in the night session, briefly shot up to 16,135 yuan/mt before drifting lower, hitting an intraday low of 16,025 yuan/mt around 21:30, then moving sideways at low levels, and finally closing at 16,050 yuan/mt, down 85 yuan/mt or 0.53% from the previous trading day's closing price. Night session volume was 32,116 lots, with open interest of 63,249 lots, up 304 lots, forming a bearish daily candlestick.

Overall, last Friday SHFE and LME weakened in tandem with highly synchronized pace: both LME lead and SHFE lead were pressured by bearish position building, with both breaking below the Bollinger middle band. In addition, the SHFE lead 2609 contract will enter delivery tomorrow (September 15), so attention should be paid to warrant cancellations and flows under the old contract delivery, as well as the pace of capital shifting to the most-traded 2610 contract during the rollover.

On the macro front:

Outside China, this week marks a "super central bank week," with the US Fed, Bank of England, and Bank of Japan set to announce rate decisions in succession. After the US August CPI landed last Friday with core MoM exceeding expectations, the market-implied probability of a 25bp Fed rate hike on September 17 rose to 88.8%, according to CME FedWatch. However, White House National Economic Council Director Hassett stated there is "no reason to hike rates," creating a divergence between official rhetoric and market expectations. The FOMC rate decision, Summary of Economic Projections, and Powell's press conference in the early hours of Thursday will be the global market focus. Geopolitically, the Middle East continues to disrupt energy supply, with the US restricting air defense windows for tankers transiting the Strait of Hormuz, ongoing exchanges of fire between Houthi forces and Saudi Arabia, and Iran-Oman consultations on strait navigation—though an agreement does not mean the strait is open. Supply concerns are underpinning international oil prices, in turn reinforcing inflation and rate hike expectations.

In China, President Xi Jinping attended the 18th BRICS Leaders' Summit, met with Indian Prime Minister Modi, and announced that China will assume the BRICS presidency in 2027. The State-owned Assets Supervision and Administration Commission of the State Council said it will coordinate the use of both domestic and international markets and optimize overseas investment layouts. In financial markets and data, SAFE Administrator Zhu Hexin met with the SFC Chairman and CEO of Hong Kong. This week, China enters a dense period of August data releases. Today, watch for August M2 money supply YoY. On Tuesday, August total retail sales and industrial value added above designated size will be released, the State Council Information Office will hold a press conference on national economic performance, and the monthly report on residential selling prices in 70 large and medium-sized cities will be released simultaneously.

Spot fundamentals:

Last Friday, SMM #1 lead price fell 25 yuan/mt, and SHFE lead first declined and then rebounded. For primary lead, market circulating cargoes were limited, supply in Jiangsu, Zhejiang, and Shanghai decreased, and a few suppliers sold out spot cargoes and suspended spot order quotations; smelters mainly delivered long-term contracts, mainstream production-area primary lead EXW quotations were at premiums of 0-50 yuan/mt against the SMM #1 lead average price, north-south differences remained, suppliers in north China further narrowed spot discounts against the most-traded SHFE lead contract (Henan narrowed to discounts of 90-50 yuan/mt), south China producers sold at prevailing prices, some quotations shifted from premiums to declines, and Jiangxi and Anhui maintained premiums of 80-100 yuan/mt. For secondary lead, secondary lead smelters held prices firm for shipments, mainstream production-area secondary refined lead EXW quotations were at discounts of 175-50 yuan/mt against the SMM #1 lead average price, with discounts narrowing, and a few regions reported premiums of 25-50 yuan/mt. Downstream, enterprises maintained purchasing as needed, some mainly consumed their own inventories, and the rest made just-in-time procurement favoring EXW cargoes from smelters, with overall spot market trading activity moderate.

Inventory: As of September 11, LME lead inventory stood at 380,025 mt, down 2,350 mt from the previous trading day; SHFE lead ingot warrant inventory totaled 59,753 mt, up 1,462 mt from the previous trading day.

Today's lead price forecast:

Last Friday, SHFE and LME weakened in tandem, with LME lead and SHFE lead both breaking below the Bollinger middle band, bears actively adding positions to pressure prices, and SHFE lead in the night session pulled back to test the 16,000 yuan/mt level; fundamentals side, domestic primary lead circulating cargoes were tight, supply in Jiangsu, Zhejiang, and Shanghai decreased, a few suppliers sold out and suspended quotations, both primary and secondary smelting ends held prices firm, spot discounts narrowed, and LME lead inventory continued to destock, providing underlying support for lead prices. Today, spot lead prices are expected to come under slight pressure along with futures, consolidate on a subdued note at high levels, and fluctuate around the 16,000 yuan/mt level, with focus on whether SHFE lead can reclaim the 16,000 yuan/mt level and the Bollinger middle band, the transmission of US dollar and LME nonferrous sector sentiment amid rising rate hike expectations, and the follow-through of spot price firmness and actual transactions.