Supply Benefits Exhausted, Focus Returned to Consumption; Lead Prices May Consolidate at High Levels [SMM Lead Morning Comment Dec 2]

Last Friday, LME lead opened at $2,050.5/mt. With the US dollar index showing a weak performance and the threat of tariff hikes by the US and Europe on China, overseas consumption expectations rose, supporting LME lead to continue its upward fluctuation trend, mostly trading between $2,075-2,080/mt during the day. At night, the US dollar rebounded after dipping, and lead ingot inventory increased, causing LME lead to give back some gains, trading around $2,050/mt. By the end of the session, LME lead rose again, finally closing at $2,081.5/mt, up 1.83%.

Last Friday, the most-traded SHFE lead 2501 contract opened at 17,355 yuan/mt. Due to the overall increase in lead ingot market inventory, SHFE lead initially dropped sharply to 17,235 yuan/mt. With the strong performance of the US dollar, SHFE lead rebounded but failed to surpass 17,400 yuan/mt, finally closing at 17,395 yuan/mt, up 0.12%. Its open interest was 57,514 lots, a decrease of 1,036 lots from the previous trading day.

Macro side, China's official manufacturing PMI for November was 50.3, expanding for three consecutive months, while the non-manufacturing business activity dropped back slightly. Reportedly, Trump threatened to impose a 100% tariff on BRICS countries! Experts say that raising tariffs could bankrupt many US companies. Additionally, Chinese enterprises faced unprecedented large-scale visa rejections by the US. According to Observer.com, among the approximately 4,000 CES exhibitors from around the world, it is estimated that over 30% are from China.

Fundamentally, the trends of in-plant inventory and social inventory of lead ingots diverged, with overall inventory showing a slight increase, which is unfavorable for the continuation of strong lead prices. The main reasons for the previous rise in lead prices were environmental protection measures and maintenance bringing the phased reduction in lead ingot supply. However, this week, the smog warning was lifted, coupled with improved profits for secondary lead, increasing the production enthusiasm of smelting enterprises. The premium for primary lead prices was adjusted downwards, while secondary lead saw an increase in discounted shipments. Overall, with previous positive factors exhausted, future lead prices will still need to focus on the consumption side.