Supply-Side Environmental Protection, Maintenance, and Imports Coexist; Lead Prices May Hover at Highs [SMM Lead Morning Meeting Summary]

Futures Market: Overnight, LME lead opened at $2,028.5/mt. Driven by the rise in SHFE lead, LME lead fluctuated upward during the Asian trading session, gradually recovering the losses from the previous day. However, as the US dollar index rose during the European trading session, LME lead came under pressure and turned to a decline, giving up some of its gains. LME lead finally closed at $2,036/mt, with a 0.44% increase. Overnight, news about environmental protection and maintenance on the supply side continued to ferment. The most-traded SHFE lead 2505 contract opened at 17,640 yuan/mt. With imported lead flowing into the domestic market, partially offsetting the supply, SHFE lead showed a pattern of moving downwards after a higher opening. In the latter part of the trading session, SHFE lead mainly fluctuated between 17,495-17,525 yuan/mt, eventually closing at 17,495 yuan/mt, with a 0.48% decrease. Its open interest reached 64,443 lots, a reduction of 2,154 lots from the previous trading day. Macro: China's Ministry of Finance: In 2025, fiscal policy will be more proactive, increasing the fiscal deficit ratio and issuing a larger scale of government bonds. PBOC adjusted the winning bid method for a 450 billion yuan MLF operation, with the MLF policy rate attribute exiting the historical stage. Media supervised by the central bank stated that MLF has returned to being a liquidity injection tool, and the net injection again demonstrates a moderately loose monetary policy orientation. US President Trump: Announce tariffs on cars, wood, and chips in the coming days, possibly reducing tariffs for multiple countries; impose a 25% tariff on countries purchasing Venezuelan oil and gas; repeatedly call on Powell within less than a week, hoping for an interest rate cut from the US Fed. Spot Fundamentals: Yesterday, in the spot lead market, SHFE lead moved upwards after a lower opening, and due to limited circulating supplies, suppliers stood firm on quotes. There were some transactions at the beginning of the session, but as lead prices increased, downstream enterprises generally adopted a wait-and-see attitude. Limited availability of electrolytic lead from major production areas led smelters to continue standing firm on quotes, with spot orders quoted at premiums of 50-150 yuan/mt against the SMM 1# lead average price ex-factory. In the trade market, quotations in the Jiangsu, Zhejiang, Shanghai region were on parity with the SHFE 2504 contract. Meanwhile, profits from secondary refined lead tightened, and some smelters stood firm on quotes, leading to an expansion in regional price differences. Secondary refined lead was quoted at discounts of 180-0 yuan/mt against the SMM 1# lead average price ex-factory. Inventory: As of March 24, LME lead inventory decreased by 550 mt to 231,700 mt. The total social inventory of lead ingots in five regions, as tracked by SMM, reached 71,900 mt, an increase of over 100 mt from March 17, and a decrease of 2,100 mt from March 20. Lead Price Forecast: Recently, lead smelters in Henan entered maintenance, and with other planned maintenance, it is expected that primary lead supply will decrease MoM in April. Some smelters in Hunan have cut production due to raw material shortages, and there are water pollution incidents, with environmental inspections extending to Guangxi and Guangdong, though they have not yet had a significant impact on production. At the same time, lead prices have fallen sharply, and smelting profits have shrunk, especially with scrap battery prices remaining high. Secondary lead enterprises' profit margins are approaching the cost line, and some key production areas have seen minor production cuts. Additionally, imported lead has flowed into the domestic market, partially filling the raw material supply gap. As the regional price difference for secondary refined lead expands, the short-term lead market will continue to revolve around supply changes and recycling costs.