SHANGHAI, June 24 - Futures: LME lead opened at $2,022/mt and fell by 3.62% to $1,942/mt overnight. During the Asian trading hours, LME lead fluctuated between $2,015-2,030/mt amid poor transactions while during the European trading hours, LME declined to $1,940/mt, recording a new 15-month low, amid the increase of US dollar caused by the hawkish remarks. The most traded SHFE 2208 lead contract opened at 15,120 yuan/mt overnight due to the decline of LME lead. As the long increased positions, the SHFE lead fell to 14,950 yuan/mt, but as the long short game intensified, SHFE lead rebounded to around 15,000 yuan/mt for amid the fundamental support, and finally closed at 15,025 yuan/mt, down 0.66%, with the open interest up 3,434 lots to 55,894 lots.
Spot fundamentals: In the lead spot market yesterday, the retail quotations of primary lead were in discounts of 150-0 yuan/mt over the SMM 1# lead average price. In mainstream trade markets such as Jiangsu, Zhejiang and Shanghai, the mainstream quotation of domestic lead maintained a discount of 50-0 yuan/mt over the SHFE lead 2207 contract. In terms of secondary lead, the smelters were active about shipment and the secondary refined lead was shipped in discounts of 300-150 yuan/mt over SMM 1# lead average price. Lead futures fell, and discounts of some quotations were slightly narrowed. At the same time, the production of secondary lead in Anhui continued to be reduced, hence there were regional differences in the supply of lead ingots. The retail transactions were relatively better than yesterday.
Lead price forecast: In terms of macro, Powell’s second day of congressional hearings indicated that even if the economy development slowed down sharply, as long as inflation did not drop rapidly, the Fed's policy will not change. The US manufacturing PMI fell to a two-year low, and demand deteriorated significantly. German and French PMI growth slowed sharply, and UK PMI showed signs of stagnation. Germany activated the second-level alert of the natural gas emergency plan amid the natural gas supply cuts. Consumers may face significant rise in gas prices, and European natural gas prices hit a six-month high. In terms of fundamentals, the US dollar rate hike is expected to rise, while the market is worried about economic recession, hence non-ferrous metals declined, of which lead fell to a new one-year low, dragging down the domestic SHFE lead. As the domestic supply reduction continued, and lead concentrate and battery scrap supply was tight, the cost support still existed, and consumption was recovering. In this case, lead prices were firm. The SHFE/LME price ratio expanded amid the increase of SHFE lead and decline of LME lead, which may be beneficial to the import of lead concentrates. SMM will continue to pay attention to the raw material supply change of primary lead and secondary lead. It is expected that the spot lead will decline 50-100 yuan/mt from yesterday.
