Lead Ingot Destocking Intensifies Before the Holiday, Lead Prices Show High-Level Fluctuation Trend [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,937/mt and fluctuated upward throughout the day. Comments from US officials regarding interest rate cuts weakened the US dollar index, while LME lead inventory reversed to a decline. During the European session, LME lead's upward momentum strengthened, reaching a high of $1,978/mt. By the close, LME lead settled at $1,976.5/mt, up 2.2%.

Overnight, the most-traded SHFE lead 2502 contract opened at 16,665 yuan/mt. In early trading, SHFE lead rose to 16,700 yuan/mt, but consumption was dragged down by the Chinese New Year holiday, causing SHFE lead to give back part of its gains. In the latter half of the trading session, SHFE lead fluctuated between 16,635-16,665 yuan/mt and finally closed at 16,645 yuan/mt, up 0.42%. Its open interest stood at 25,208 lots, down 1,862 lots from the previous trading day.

》Click to view SMM lead spot historical prices

Macro: US Treasury Secretary nominee Bessent stated that not extending tax cuts would lead to an "economic disaster," supported increasing sanctions on Russia, and claimed that Trump's policies would not drive inflation. He emphasized the importance of maintaining the US dollar's status as a global reserve currency, advocated for the independence of the US Fed, and expressed willingness to work with Trump and lawmakers to remove the debt ceiling, ensuring no US debt default. US Fed Governor Waller did not rule out the possibility of an interest rate cut in March, suggesting that if data aligns, there could be 3-4 rate cuts this year. Expectations for US Fed interest rate cuts among traders have risen.

Spot Market Fundamentals:

Yesterday in the lead spot market, SHFE lead remained range-bound. Suppliers actively quoted and sold cargoes to clear inventories before the holiday. However, due to limited warehouse warrant cargoes, quotations were scarce, with transactions mainly involving cargoes self-picked up from production sites. Meanwhile, secondary smelters also actively sold cargoes, with secondary refined lead quoted at discounts of 50 yuan/mt to premiums of 50 yuan/mt against the SMM 1# lead average price on an ex-factory basis. Downstream enterprises have mostly completed pre-holiday stockpiling, leading to weaker purchase willingness. A small number of enterprises that have not completed stockpiling continued to restock, resulting in subdued spot order market activity.

Inventory: As of January 16, LME lead inventory decreased by 2,175 mt to 236,825 mt. As of January 16, the total social inventory of SMM lead ingots across five regions stood at 46,700 mt, up by approximately 800 mt from January 9 but down by 900 mt from January 13.

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Lead Price Forecast for Today:

Currently, with two weeks remaining before the Chinese New Year, downstream enterprises are conducting routine stockpiling of lead ingots due to differences in logistics suspension and holiday schedules. This has consumed both in-plant and social inventories of smelters. Lead smelters and traders are also actively clearing inventories before the holiday. Overall, spot premiums on parity have narrowed WoW, with primary lead spot order quotations against the SMM 1# lead average price ranging from premiums of 0-200 yuan/mt on an ex-factory basis. Next week, as the Chinese New Year approaches, most logistics vehicles are expected to cease operations, and more downstream enterprises will go on holiday, further dampening lead market transactions. Subsequently, expectations for lead ingot inventory buildup are rising.