Spot Lead Transactions Marginally Improve, but Expectations of an Increase in Visible Inventory Remain [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,979/mt. Market concerns over trade friction persisted, causing the center of LME lead to shift further downward, concentrating more in the $1,970-1,980/mt range. During this period, the US dollar index jumped initially and then pulled back, suppressing the performance of base metals. LME lead eventually closed at $1,973/mt, down 0.15%.

Overnight, the most-traded SHFE lead 2503 contract opened at 17,140 yuan/mt. After the opening, long and short positions intertwined, and SHFE lead remained stuck in the 17,100-17,140 yuan/mt range until the final close at 17,100 yuan/mt, down 0.26%. Its open interest reached 38,343 lots, a decrease of 710 lots compared to the previous trading day.

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Macro Perspective: In January, US CPI exceeded expectations across the board, with the YoY growth rate rising to 3% and core CPI accelerating to 0.4%. The "New Fed News Agency" commented that the strong inflation data for January undermines the rationale for the US Fed to further "readjust" its interest rate cut path before mid-year. During the congressional testimony the following day, Powell stated that the US Fed might adjust rates due to tariffs, and the CPI data indicates more effort is needed to reduce inflation.

Spot Market Fundamentals:

Yesterday in the lead spot market, SHFE lead showed a trend of opening low and moving higher, with suppliers quoting along with the market. During this period, smelters' ex-factory quotations maintained premiums of 0-50 yuan/mt against the SMM 1# lead average price. In South China, premiums were further reduced. In the secondary lead market, smelters actively shipped goods, with secondary refined lead quoted at discounts of 100-50 yuan/mt against the SMM 1# lead average price ex-factory. Downstream enterprises showed moderate inquiry interest, with some willing to purchase at low prices while others remained cautious and observed. The spot order market showed no significant improvement in transactions. Additionally, in the trade market, quotations in Jiangsu, Zhejiang, and Shanghai were on par with the SHFE lead 2502 contract or on par with the SHFE lead 2503 contract.

Inventory: As of February 12, LME lead inventory increased by 500 mt to 225,425 mt. As of February 10, the total social inventory of SMM lead ingots in five regions 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.

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Lead Price Forecast:

Recently, the domestic lead market supply and demand have gradually recovered, with some downstream enterprises beginning to restock as needed, leading to marginal improvement in spot transactions. Meanwhile, the delayed resumption of production by medium and large secondary lead enterprises in Anhui may result in February's lead ingot supply increase falling short of expectations, supporting lead prices to fluctuate upward. Additionally, with the SHFE lead 2502 contract delivery date approaching, hidden lead ingot inventory is transitioning to visible inventory, and the risk of inventory buildup will continue to limit the upside potential of lead prices.