Frequent Domestic Environmental Protection Incidents; Lead Prices Show Strong Resistance to Decline [SMM Lead Morning Meeting Summary]

Futures Market:

Due to the Christmas holiday, multiple exchanges in the European and US markets were closed, and the LME was also in a holiday closure.

Overnight, the most-traded SHFE lead 2502 contract opened at 17,350 yuan/mt. As the year-end approached, market trading further weakened, with trading volume and open interest continuing to shrink. SHFE lead mostly consolidated around 17,350 yuan/mt before finally closing at 17,355 yuan/mt, down 0.17%. Its open interest stood at 55,378 lots, a decrease of 1,624 lots compared to the previous trading day.

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Spot Market Fundamentals:

Yesterday in the lead spot market, SHFE lead fluctuated downward with limited market supply. Suppliers offered few quotations, while ex-factory quotations for cargoes self-picked up from smelters remained firm. Secondary refined lead followed market trends, with premiums and discounts showing little difference from the previous day. Some large enterprises closed accounts at the year-end, and downstream enterprises showed average purchasing enthusiasm, leaving the spot order market in a state of weak trading on both sides. For primary lead, smelter inventories were limited, and quotations remained relatively firm. Spot quotations were at premiums of 50-300 yuan/mt against the SMM 1# lead average price on an ex-factory basis. In mainstream trade markets such as Jiangsu, Zhejiang, and Shanghai, domestic lead mainstream quotations were at premiums of 0-10 yuan/mt against the SHFE lead 2501 contract. For secondary lead, production restrictions in major producing areas persisted, with some smelters selling inventories. Secondary refined lead quotations were at discounts of 50 yuan/mt to premiums of 50 yuan/mt against the SMM 1# lead average price on an ex-factory basis.

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Lead Price Forecast for Today:

Macro side, the PBOC has conducted scaled-down MLF rollovers for five consecutive months and kept rates unchanged for three consecutive months, with a significant net withdrawal of 1.15 trillion yuan. According to China Securities Journal, the PBOC assessed that current market liquidity is ample. The National People's Congress passed the VAT Law of China, which will take effect on January 1, 2026.

Fundamentals side, the overseas market has entered a holiday state, and the domestic market has also seen weakened trading due to year-end factors. Currently, environmental protection measures in many regions of China are impacting the market, with a greater effect on lead ingot supply than on the consumption side. The spot market supply remains relatively tight. On the consumption side, some large downstream enterprises are closing accounts and taking inventory at the year-end, reducing lead ingot procurement activities. The market continues to exhibit a weak supply and demand pattern. Additionally, we need to keep monitoring the dynamic changes in the domestic market's environmental protection impacts.