Without cost support to secondary lead, lead prices are expected to continue fluctuating downward this week

This week, key macroeconomic data will be released, including China's July Caixin PMI for the service sector, China's July trade balance, China's July CPI (YoY), the US July ISM Non-Manufacturing PMI, and the US June wholesale sales. Additionally, the US Fed announced at its July meeting that it would keep interest rates unchanged but hinted at a possible rate cut in September.

Regarding LME lead, as more lead ingots are transferred to China, LME lead inventories fell by over 10,000 mt weekly, with prices showing signs of a rebound. However, due to the widening LME lead cash-to-three-month contango, which was reported at -$40.59/mt as of August 1, LME lead failed to hold above $2,100/mt. During this period, as the SHFE/LME lead ratio narrowed, expectations for China’s lead ingot imports declined, and the sustainability of overseas lead inventory declines remained uncertain. LME lead is expected to consolidate between $2,000-2,100/mt this week.

Domestically, the supply of secondary lead and imported lead increased, while the peak season for lead consumption has not yet started. After domestic lead inventories fell to a one-year low, they rebounded, dragging lead prices down. Meanwhile, battery scrap prices fell synchronously, so secondary lead costs may be reduced. Lead prices are expected to continue fluctuating downward, with the most-traded SHFE lead contract expected to trade between 17,800-18,500 yuan/mt this week.

Spot price forecast: 18,000-18,750 yuan/mt. Supply side, primary lead smelters resumed production, and imported lead arrived at ports and began to be sold. Therefore, spot lead showed a gradual shift towards spot discounts. The decline in lead prices caused some secondary lead smelters to offer secondary refined lead at a premium due to cost considerations, but with battery scrap prices falling, subsequent premium transactions for secondary refined lead may be difficult to maintain. Demand side, the end-user consumption in the lead-acid battery market was average. Facing falling lead prices, downstream companies adopted a wait-and-see stance and were inclined to purchase at low prices.