Favourable macro front news boosts lead prices, but spot market remains weaker than futures [[SMM Lead Morning Meeting Summary]]

Futures Market Overview:

Overnight, LME lead opened at $1,918/mt. During the Asian session, LME lead was dragged down by the weakness of SHFE lead, oscillating in the doldrums, with the intraday low reaching $1,915/mt. Entering the European session, the center of LME lead's operation gradually shifted upwards, especially as lead inventory fell by nearly 5,000 mt daily. Driven by destocking, LME lead gradually approached $1,935/mt. By the end of the session, domestic and overseas lead prices jointly surged, with LME lead shooting straight up to touch $1,961/mt, recovering most of the losses from the previous two trading days, and finally closing at $1,959.5/mt, up 2.16%.

Overnight, the most-traded SHFE lead 2506 contract opened at 16,720 yuan/mt. The weakness of domestic lead consumption persisted, and after opening, SHFE lead basically consolidated between 16,700-16,750 yuan/mt. Meanwhile, expectations for production cuts in domestic secondary lead intensified. By the end of the session, SHFE lead surged strongly, moving above the 20-day moving average, with the intraday high reaching 16,855 yuan/mt, and finally closing at 16,830 yuan/mt, up 0.57%. Its open interest reached 36,763 lots, a decrease of 166 lots from the previous trading day.

》Click to view historical SMM lead spot quotes

Macro Aspects: The US Fed paused interest rate cuts again, warning of stagflation risks and reiterating increased "uncertainty". Powell ignored Trump, reiterating that there was no rush to cut interest rates, stating that the economy was still doing well but with extremely high uncertainty, and refusing to act preemptively due to tariffs. China's State Council Information Office released significant signals through a "package of financial policies". Yesterday, Pan Gongsheng, Governor of the People's Bank of China, simultaneously announced RRR cuts and interest rate cuts: a 0.5 percentage point RRR cut, a 0.1 percentage point reduction in policy interest rates, a 0.25 percentage point reduction in housing provident fund interest rates, and a decrease in the interest rate for first-time homebuyers with loans over five years from 2.85% to 2.6%, with interest rates for other tenures adjusted accordingly.

Spot Market Fundamentals:

In yesterday's lead spot market, after the central bank announced RRR cuts and interest rate cuts, the SHFE lead futures market once approached 16,900 yuan/mt. However, the fundamental performance was poor, with intraday gains retracting several times. Suppliers shipped goods according to market conditions, with some reducing quotations or quoting at premiums due to decreased warehouse circulation, while quotations for cargoes self-picked up from production sites at other smelters remained at discounts (against the SMM 1# lead average price). The market quotations for secondary lead were chaotic, with smelters reducing shipments and standing firm on quotes due to losses. Some regions still shipped at discounts, with the discount for secondary refined lead narrowing to 50-0 yuan/mt against the SMM 1# lead average price, while those standing firm on quotes quoted at a premium of 50 yuan/mt. Downstream enterprises bought the dip as needed, with inquiry enthusiasm rising, and spot market transactions improving regionally. In the trade market, warehouse cargoes in the Jiangsu, Zhejiang, Shanghai region were quoted at premiums of 0-100 yuan/mt against the SHFE lead 2505 contract.

Inventory: As of May 7, the total LME lead inventory stood at 256,700 mt, a decrease of 4,800 mt from the previous trading day. The total SHFE lead warrant inventory was 39,981 mt, a decrease of 25 mt from the previous trading day.

》Click to view the SMM Metal Industry Chain Database

Today's lead price forecast:

The off-season trend in lead consumption in the domestic market remains unchanged, with difficulties in destocking lead ingots. Spot lead is generally traded at a discount. Meanwhile, there is a prominent imbalance in the supply of raw materials such as scrap batteries, and losses among secondary lead smelters have widened. Currently, losses per mt of secondary refined lead are as high as 600-800 yuan/mt, leading to a decline in production enthusiasm among smelters. They intend to further cut production in mid-to-late May, which will provide some support for lead prices in the short term.