Supply Factors Exhausted, Lead Prices to Focus on Consumption Recovery [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,008.5/mt. Under strong pressure from the US dollar, LME lead fluctuated downward throughout the day. Especially during the European session, the US dollar index surged, hitting a new high in over a year, causing base metals to generally decline. LME lead also dropped again, hitting a nearly two-month low of $1,958/mt. It finally closed at $1,964/mt, down 2.29%.

Overnight, SHFE lead warehouse warrant inventory increased again. The most-traded SHFE lead 2412 contract opened at 16,850 yuan/mt. Dragged down by the decline in LME lead, longs exited en masse after the opening, causing SHFE lead to quickly drop to 16,755 yuan/mt, nearly erasing all gains from the past week. During the session, SHFE lead attempted to regain 16,800 yuan/mt but failed, fluctuating downward in the latter half of the trading session. It finally closed at 16,790 yuan/mt, down 1.35%. Its open interest was 36,864 lots, a decrease of 3,165 lots from the previous trading day.

Macro side, Fed Chairman Powell stated that the economy is strong, and the US Fed does not need to rush to cut interest rates, having time to understand the impact of Trump's policies. Where is the endpoint of this round of interest rate cuts by the US Fed? Goldman Sachs: around 3.25%-3.5%, about 100 basis points higher than the peak of the last cycle. US October PPI rose across the board, up 2.4% YoY, higher than expected, with increased stickiness in the service sector. The number of initial jobless claims in the US last week fell to 217,000, below expectations.

Fundamentals side, today is the delivery day for the SHFE lead 2411 contract. The visible inventory increase brought by lead ingot delivery continues to drag down lead prices. After this week's lead price rise, secondary lead profits have recovered, and smelters are gradually resuming production. Additionally, the smog warnings in Hebei, Henan, and other regions will be lifted, potentially leading to a phased increase in lead ingot supply next week. Lead ingot social inventory is expected to continue rising. Furthermore, we need to pay attention to the restocking actions of downstream enterprises after lead prices jump initially and then pull back.