Rising China Supply Combined with Ex-China Inventories at 13-Year High Limits Upside Momentum for Lead Prices [SMM Lead Market Weekly Forecast]

         Next week, on the macro front, a number of heavyweight economic data releases are due, including US April JOLTs job openings (10,000), US May ADP employment (10,000), US May unemployment rate, and US May seasonally adjusted non-farm payrolls (10,000). Against the backdrop of weak consumption and intensifying energy inflation, attention should be paid to US Fed officials' outlook on interest rates, while the US Fed is set to release its Beige Book on economic conditions.

LME lead side, LME lead has recently been in a backwardation structure, with more suppliers shipping to delivery warehouses. Following a single-day surge of over 20,000 mt in lead inventory the previous week, lead inventory increased by nearly 30,000 mt again this week, pushing LME lead inventory to its highest level since 2013. Meanwhile, the LME lead Cash-3M spread shifted from a premium to a discount, and subsequent buying and delivery activities may decrease. LME lead is expected to trade in the range of $1,990-2,045/mt next week.

SHFE lead side, under the combined effects of maintenance at major primary lead enterprises and downstream dip-buying, China's lead ingot inventory declined further. However, more secondary lead enterprises resumed production, and the lead ingot supply gap is about to be filled, leaving insufficient upward momentum for lead prices. The most-traded SHFE lead contract is expected to trade in the range of 16,400-16,800 yuan/mt next week.

Spot price forecast: 16,350-16,600 yuan/mt. Supply side, primary lead and secondary lead enterprises are in a phased recovery, and spot market circulating supplies are expected to increase. However, secondary lead losses persist, and smelters will hold prices firm on shipments. Primary lead, on the other hand, may see reduced spot premiums (against SMM #1 lead average price) trading activity due to looser supply. Consumption side, the lead-acid battery market shows no improvement in end-use consumption in June, with producers maintaining a produce-based-on-sales approach, and just-in-time procurement remains the mainstream.