Domestic Supply Tightness vs. Imported Lead Influx: Beware of Lead Price Retreat Risk after Initial Jump

In the week of July 8-12, the main macroeconomic data will include China's June CPI YoY change, the US June non-seasonally-adjusted CPI YoY and MoM change, and the US July one-year inflation rate expectations. Additionally, Fed Chairman Powell will deliver his semi-annual monetary policy testimony before the House Financial Services Committee.
Regarding LME lead, LME lead inventory continued to decline, down 2,225 mt WoW in the week of July 1-5, while the LME lead cash-to-three-month contango slightly narrowed to -$46.14/mt as of July 4. Recently, the window for lead imports has opened, with lead concentrate and lead ingots starting to flow into the domestic market. Coupled with a weaker US dollar index, LME lead may continue its bullish trend, expected to trade between $2,200-2,275/mt.
SHFE lead: The current domestic raw material supply issue still exists, and the reduction in secondary lead production may increase. It is expected that before the resumption of production at secondary lead smelters, the tight supply will continue to offer solid support to lead prices. Meanwhile, with the lead import window open, lead concentrate and lead ingots are gradually flowing into the domestic market. The focus will be on the actual arrivals of lead ingots, and caution is advised regarding the risk of lead prices surging and then retreating. The most-traded SHFE lead contract is expected to trade between 19,350-20,050 yuan/mt in the week of July 8-12.
Spot price forecast: 19,350-19,850 yuan/mt. For primary lead, delivery brand enterprises still have maintenance activities, inventory at smelters remains low, and market circulation of goods is limited before delivery, making it likely that spot transactions will be at a premium over futures prices. For secondary lead, with significant production cuts at smelters and the influx of imported lead, the premium of secondary lead may turn to discounts. The lead-acid battery market is in a transition period between peak and off-peak seasons, and with high lead prices, downstream procurement is concentrated on long-term contracts, with spot purchases only meeting immediate needs.