Weak Consumption Coexists with Reduced Supply, Lead Prices May Remain in a Consolidation Phase in the Short Term [[SMM Morning Lead Meeting Summary]]

Futures Market:

Overnight, LME lead opened at $1,957.5/mt, and the entire day saw a "V"-shaped trend for LME lead. During most of the Asian session, LME lead consolidated around $1,950/mt. However, as it entered the European session, LME lead gradually fluctuated downward, amid a strengthening US dollar index, which put pressure on non-ferrous metals, causing them to decline. LME lead also fell to $1,932.5/mt. But with the continuous decline in lead inventory, LME lead recouped its intraday losses during the night session, eventually closing at $1,952.5/mt, down 0.36%.

Overnight, the most-traded SHFE lead 2506 contract opened at 16,760 yuan/mt. Weak consumption coexisted with reduced supply, leading to continuous battles between longs and shorts during the session. SHFE lead fluctuated rangebound, but its center moved slightly higher compared to yesterday. Eventually, SHFE lead closed at 16,785 yuan/mt, up 0.06%. Its open interest reached 34,729 lots, an increase of 347 lots from the previous trading day.

》Click to view historical spot quotes for SMM lead

Macro Aspects: The UK and the US have reached an agreement on the terms of a tariff and trade deal, with details yet to be finalised. The US will retain a 10% base tariff, reducing tariffs on the first 100,000 British cars imported to 10% and tariffs on steel and aluminum to zero. The UK will reduce tariffs on US ethanol to zero and reach a reciprocal beef market access agreement. Trump stated that the UK deal is not a template, with 10% possibly being the minimum, and tariffs on other countries could be higher. The EU will file a lawsuit with the WTO over US tariffs and is preparing countermeasures against 95 billion euros worth of US imports, targeting cars, aircraft, and whiskey. The India-Pakistan conflict has escalated, with explosions occurring in multiple locations. The Pakistani stock market plummeted by 7%, and the Indian rupee recorded its largest decline against the US dollar in over three years.

Spot Market Fundamentals:

In yesterday's spot lead market, SHFE lead held up well. Suppliers were mostly active in selling, with quoted premiums lower than yesterday. Warehouse cargoes saw small discounts, while discounts for cargoes self-picked up from production sites at smelters further widened. Mainstream producing region smelters quoted their cargoes self-picked up from production sites at discounts of 220-80 yuan/mt against the SHFE lead 2506 contract, ex-factory. In the secondary refined lead sector, production cuts at smelters increased, with some enterprises halting sales. Some secondary refined lead was quoted at discounts of 50-0 yuan/mt or even premiums of 50-75 yuan/mt against the SMM 1# lead average price. Downstream enterprises purchased as needed, and due to price spreads, their rigid demand leaned towards primary lead cargoes. In the trading market, warehouse cargoes in the Jiangsu, Zhejiang, Shanghai region were quoted at discounts of 10 yuan/mt to premiums of 20 yuan/mt against the SHFE lead 2505 contract.

Inventory: As of May 8, total LME lead inventory stood at 255,150 mt, a decrease of 1,550 mt from the previous trading day. The total social inventory of SMM lead ingots across five regions reached 47,500 mt, an increase of 2,200 mt from April 30 and an increase of 1,600 mt from May 6.

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Today's Lead Price Forecast:

It is understood that from mid-to-late May to June, there will be an increase in planned maintenance and production cuts among primary lead and secondary lead enterprises. The supply of lead ingots is expected to tighten, which may alleviate the subsequent pressure of inventory buildup for lead ingots. Currently, the availability of lead ingots in the market is relatively loose. Primary lead is generally traded at a discount, and the spread between futures and spot prices has widened, prompting suppliers to increase their willingness to transfer to delivery warehouses. Attention should be paid to the possibility of delivery brand relocation brought about by the delivery of the SHFE lead 2505 contract next week, as well as the magnitude of the transformation of unreported inventory into reported inventory. In addition, the off-season trend in lead consumption remains unchanged, coupled with export obstacles, resulting in limited demand for lead ingots from downstream enterprises. Consumption remains a drag on the movement of lead prices.