Fundamentals Remain Mediocre, Lead Prices May Continue to Consolidate [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,065.5/mt. With fundamentals showing mediocre performance, LME lead mostly consolidated, operating between $2,065-2,085/mt. Near the close, the US dollar index surged, suppressing base metals, and LME lead reversed and fell, finally closing at $2,049.5/mt, down 0.99%.

Overnight, SHFE lead warehouse warrant inventory decreased. The most-traded SHFE lead 2411 contract opened at 16,740 yuan/mt, showing strong performance initially and reaching a high of 16,850 yuan/mt. Subsequently, the tug-of-war between longs and shorts intensified, and SHFE lead jumped initially and then pulled back, falling to 16,610 yuan/mt. By the close, the decline in SHFE lead slowed, and SHFE lead finally closed at 16,635 yuan/mt, down 0.66%. Its open interest was 33,392 lots, a decrease of 632 lots from the previous trading day.

Macro side, China cut interest rates, with the LPR down by 25 basis points, the largest single reduction in history. Dallas Fed President Logan, Minneapolis Fed President Kashkari, and Kansas City Fed President Schmid all supported gradual rate cuts, slowing the pace of the significant rate cut in September. Market expectations for rate cuts next year decreased, and US Treasury yields surged.

Fundamentals side, recently, battery scrap prices remained high, and secondary lead smelters saw thin profits. Some mainstream regions reported secondary refined lead at a premium of 0-50 yuan/mt over the SMM 1# lead average price, while high-bismuth lead could be at a discount of 100-50 yuan/mt ex-factory. Last week, some primary lead smelters unexpectedly underwent maintenance, leading to a regional reduction in lead ingot supply. Coupled with the price spread between secondary lead and primary lead, downstream procurement favored primary lead, and primary lead smelters' inventories generally declined. This week, attention should be paid to the resumption of lead smelters and the progress of environmental protection checks in Anhui.