Macro Complexity and Mixed Fundamentals, Lead Price Lacks Upward Momentum [SMM Lead Market Weekly Forecast]

         Next week, on the macro data front, the US May core PCE price index YoY rate, US May personal spending MoM rate, and the Eurozone June manufacturing PMI flash reading are about to be released. The US Fed left interest rates unchanged in June as expected, but the meeting sent a clear hawkish signal, including a sharp upward revision to inflation forecasts and a dot plot showing that a majority of officials expected rate hikes within the year. In addition, the US-Iran memorandum of understanding was officially signed and entered into force, initiating a 60-day negotiation period, while the latest foreign media reports indicate that Israel has again attacked Lebanon, leaving Middle East peace talks still uncertain.

On the LME lead front, LME lead inventories have been on a downtrend for three consecutive weeks, but total inventory remains at a high level of 300,000 mt. During this period, the LME Cash-3M spread shifted from a premium last week to a discount, latest at -$28.4/mt. Meanwhile, new progress emerged in the Middle East peace talks, and expectations for US Fed rate hikes within the year rose. With a complex macro environment, lead prices are expected to continue consolidating, and the consolidation range will widen, with LME lead trading in the range of $1,955-2,000/mt.

On the SHFE lead side, after the Dragon Boat Festival holiday, production resumptions at downstream enterprises will bring some rigid demand. However, it should be noted that at the half-year mark, large downstream enterprises will close their books and take stock, and lead ingot purchasing will be suspended, providing limited support for lead prices. Meanwhile, maintenance at primary and secondary lead smelters is increasing, and supply tightening expectations support stronger lead prices. Under the combined effect of these factors, the most-traded SHFE lead contract is expected to trade in the range of 16,250-16,650 yuan/mt next week.

Spot price forecast: 16,150-16,450 yuan/mt. Due to smelter maintenance in mid-to-late June, lead ingot supply will be relatively tight. However, with the ongoing mid-year capital recouping, suppliers will continue to clear inventory and sell, and spot lead is expected to maintain small discounts (vs. SMM# lead) when selling. On the consumption side, downstream enterprises also face mid-year capital recouping. Some enterprises will maintain production with their inventory or continue to pick up previously-ordered lead ingots, with actual procurement to be postponed.