Weak Reality Issues Prominent, Lead Prices May Return to Fundamentals [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,998/mt. Following the announcement of new US tariff policies, market concerns over the economic impact of trade frictions intensified. Coupled with hawkish remarks from the Fed Chairman, LME lead pulled back from highs. Particularly during the European session, LME lead inventory increased by over 3,000 mt, further lowering the trading center of LME lead, approaching $1,970/mt. By the close, it settled at $1,976/mt, down 1.08%.

Overnight, dragged down by the decline in LME lead, the most-traded SHFE lead 2503 contract opened lower with a gap at 17,065 yuan/mt. Subsequently, the tug-of-war between longs and shorts intensified, with SHFE lead consolidating between 17,060-17,090 yuan/mt before finally closing at 17,060 yuan/mt, down 0.41%. Its open interest stood at 39,564 lots, a decrease of 716 lots compared to the previous trading day.

》Click to View SMM Lead Spot Historical Prices

Macro: Powell's First Day of Congressional Testimony: The Fed is not in a hurry to cut interest rates, and the law does not allow Trump to dismiss Fed governors. The neutral rate has risen significantly compared to pre-pandemic levels. It is too early to assess the economic impact of tariffs, though it is acknowledged that tariffs may push up inflation. "New Fed Communications": Powell summarized this year's Fed path as no rate cuts unless there is progress in reducing inflation, and rate cuts if the economy slows significantly.

Spot Fundamentals:

Yesterday in the lead spot market, SHFE lead remained in a consolidation phase. Suppliers were actively offloading cargoes, with some self-picked cargo quotations further expanding, even showing slight discounts against the SMM 1# lead average price. Others quoted at premiums of 0-50 yuan/mt ex-factory against the SMM 1# lead average price. Meanwhile, secondary lead smelters generally expanded discounts for shipments, with secondary refined lead quoted at discounts of 100-50 yuan/mt ex-factory against the SMM 1# lead average price. Downstream enterprises increased inquiries and negotiations, with some large-discount cargoes being traded, while high-priced cargoes remained difficult to sell. In the trade market, quotations in Jiangsu, Zhejiang, and Shanghai were at discounts of 30-0 yuan/mt against the SHFE 2502 contract or on par with the SHFE 2503 contract.

Inventory: As of February 11, LME lead inventory increased by 3,550 mt to 224,925 mt. As of February 10, the total social inventory of lead ingots in five major regions tracked by SMM reached 46,200 mt, an increase of 6,900 mt compared to January 27 and an increase of 2,700 mt compared to February 6.

》Click to View SMM Metal Industry Chain Database

Lead Price Forecast:

Recently, the Chinese market has been in the process of recovering after the Chinese New Year. This week, lead ingot supply and demand are expected to increase. While secondary lead smelters are gradually resuming production, the current consumption in the lead-acid battery market remains moderate. Some downstream enterprises continue to digest previous inventories of lead ingots and batteries, making it difficult for lead ingot procurement needs to quickly match the supply from resumed production at lead smelters. Lead ingot inventory is accumulating, spot discounts are widening, and short-term lead prices are under pressure, with the gap between futures and spot prices narrowing.