SHFE and LME lead prices may continue to diverge

This week, the main macroeconomic data include China's May total retail sales YoY, China's May industrial output above designated size YoY, the US May retail sales MoM, and the US June S&P Global Manufacturing and Services PMI preliminary values. Additionally, continue to monitor the latest developments in the presidential elections in Europe and the US.

LME lead inventories rose again last week, accumulating by 11,400 mt to 196,700 mt. During this period, the LME lead 0-3 spread remained in a discount state, reported at -$54.84/mt as of June 13, both of which are unfavorable for LME lead to stop falling. Additionally, the US Fed's June meeting results remained unchanged as expected, with the dollar rebounding from lows, putting pressure on base metals. Subsequently, LME lead may continue to fluctuate weakly, expected to trade between $2,100-2,200/mt this week.

For domestic SHFE lead, the lead ingot import window briefly opened last week, but there were not many actual imports arriving at ports. Currently, the domestic lead trading logic focuses more on the rising raw material costs, especially the high battery scrap prices, squeezing secondary lead smelting profits and causing losses. This even forced secondary lead producers to reduce production due to insufficient scrap supply, forming strong support for lead prices. It is expected that the most traded SHFE lead contract will trade between 18,400-18,900 yuan/mt this week.

Spot price forecast: 18,400-18,750 yuan/mt. For primary lead, smelter maintenance and recovery coexist, with little change in supply. This week, attention should be paid to whether the circulating supply in the spot market will increase after the delivery of the SHFE 2406 lead contract, with small expected fluctuations in premiums and discounts. For secondary lead, the supply conflict of battery scrap intensifies, with strong price trends, forcing smelters into losses and production cuts. Prices of secondary lead may be higher than primary lead. In terms of lead consumption, the lead-acid battery market consumption has not changed much, with downstream companies maintaining a restock-as-needed mode and waiting for opportunities to purchase at low prices.

According to the SMM model, the forecasted price range for the average price of SMM1# lead ingots is [18,360, 18,985], the extreme price range is [18,020, 19,250], the normal price range is [18,250, 19,070], and the conservative price range is [18,470, 18,900]; the support range is [18,250, 18,470], and the resistance range is [18,900, 19,070].

The forecasted price range for the closing price of the most traded lead contract is [18,445, 18,980], the extreme price range is [18,210, 19,160], the normal price range is [18,370, 19,040], and the conservative price range is [18,520, 18,920]; the support range is [18,370, 18,520], and the resistance range is [18,920, 19,040].