Rising Risk of Lead Ingot Inventory Buildup in China; Lead Prices May Remain in the Doldrums [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $2,020/mt. During the Asian session, LME lead continued to fall, approaching the $2,000/mt level and hitting a low of $2,007/mt. Entering the European session, ex-China lead inventory declined by over 1,000 mt, and LME lead gradually stopped falling and rebounded, recovering most of the intraday losses, ultimately closing at $2,016.5/mt, down 0.2%.

Overnight, the most-traded SHFE lead 2607 contract opened at 16,455 yuan/mt. After the opening, SHFE lead was in the doldrums, dipping to 16,380 yuan/mt at one point, a new low in nearly three weeks. However, market confidence in secondary lead cost support remained, and SHFE lead gradually rebounded in the latter half, ultimately closing at 16,430 yuan/mt, down 0.27%. Open interest stood at 69,309 lots, an increase of 1,182 lots from the previous trading day.

Macro front:

US President Trump: in the final negotiation stage to end the Iran war, refusing to release funds to Iran before signing an agreement. Iran's Revolutionary Guards: ceasefire on all fronts including Lebanon is a preliminary condition for ending the war with the US. Hezbollah: rejected the so-called results of direct Lebanon-Israel negotiations, only concerned with a comprehensive ceasefire. Additionally, Zelenskyy publicly wrote to Putin, proposing a meeting; Putin said he was willing to negotiate with the Ukrainian side on the basis of the Anchorage meeting. Furthermore, US Fed officials: the current choice is between remaining patient or raising interest rates, with inflation being the top economic risk, and AI having no impact so far.

:

Yesterday in the lead spot market, SHFE lead reversed and fell, giving back all gains for the week. Suppliers had mixed selling sentiments — some sold at discounts following the market, while others suspended quotations and adopted a wait-and-see approach. Additionally, the regional price spread for cargoes self-picked up from primary lead smelters widened. Mainstream production areas were quoted at premiums of 0-25 yuan/mt against SMM #1 lead average price on an ex-works basis, with discounts of 25 yuan/mt still available in some regions, while premiums in certain regions rose to 200-300 yuan/mt. Secondary lead side, smelters either held back from selling at low prices and suspended quotations, or quoted at premiums. Secondary refined lead was quoted at premiums of 0-75 yuan/mt against SMM #1 lead on an ex-works basis. Most downstream enterprises had strong wait-and-see sentiment, but inquiry activity improved compared to the previous day. Some enterprises bought the dip as needed, and spot market transactions improved regionally, dominated by low-priced cargoes self-picked up from smelters.

Inventory: As of June 4, LME lead inventory stood at 312,525 mt, a decrease of 1,150 mt from the previous trading day. SHFE lead ingot warrant inventory totaled 57,498 mt, unchanged from the previous trading day. SMM lead ingot social inventory increased by approximately 300 mt compared to June 1.

Lead price forecast for today:

Recently, primary lead and secondary lead enterprises in Henan, Anhui, and other regions resumed production in a concentrated manner, leading to an increase in lead ingot supply. Meanwhile, as lead prices strengthened in the first half of the week, downstream enterprises showed poor enthusiasm for purchases. Additionally, due to the off-season and high-temperature weather, some downstream enterprises plan to take holidays, weakening lead consumption, and social inventory of lead ingots shifted to an upward trend. At the same time, the delivery of the SHFE lead 2606 contract is on the agenda, and attention should be paid to the possibility of hidden inventory converting into visible inventory going forward. In the short term, lead prices may remain in the doldrums. Furthermore, while lead prices declined, scrap battery prices saw limited declines due to tight supply, expanding losses for secondary lead producers, with cost support factors still in place on the downside.

Data source disclaimer: Data other than public information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice.