Divergence in Supply and Demand Growth Domestically and Overseas: Will Lead Prices Shift to LME Outperforming SHFE? [SMM Weekly Lead Market Forecast]

         Next week, the key macroeconomic data to watch includes China's YoY total retail sales of consumer goods in April, China's YoY industrial added value of enterprises above designated size in April, the final annual CPI rate for the Eurozone in April, and the preliminary US S&P Global Manufacturing PMI for May. Additionally, the State Council Information Office will hold a press conference on the national economic performance.

         For LME lead, overseas lead inventory continues its downward trend, while the LME lead cash-3M contango narrows further. There was even a premium of $5.95/mt during the period when LME lead prices fell early in the week, a rare premium phenomenon since February 28, 2024. Furthermore, new capacity for lead-acid battery enterprises in Southeast Asia is set to commence production in Q3, with positive future consumption expectations potentially driving lead prices higher. It is expected that LME lead will trade within the range of $1,970-2,020/mt.

         Domestically, for SHFE lead, the SHFE lead 2505 contract enters delivery this week. Suppliers are transferring inventory to delivery warehouses, and lead ingot inventory has duly transitioned from unreported inventory to reported inventory, slowing the pace of lead price increases. The current off-season trend in the lead-acid battery market remains unchanged, representing the most significant bearish factor. Additionally, with the recent commencement of production for new secondary lead capacity, lead ingot supply is expected to increase next week, potentially exacerbating inventory buildup. It is anticipated that the most-traded SHFE lead contract will trade within the range of 16,750-17,050 yuan/mt.

         Spot price forecast: 16,650-16,850 yuan/mt. For primary lead, production remains relatively stable among enterprises. Due to the SHFE lead delivery factors this week, in-plant inventory has been reduced (including simple transfers), and suppliers have no intention of further expanding spot discounts for sales. Spot discount levels are expected to remain stable. For secondary lead, as lead prices rebound, losses for secondary lead have slightly improved, with some enterprises expressing interest in resuming production. Coupled with the commencement of new capacity, the spot discounts for secondary refined lead may widen again. On the consumption side, production changes among lead-acid battery enterprises remain relatively small, with most enterprises primarily purchasing through long-term contracts, and it is difficult to see significant improvements in spot market transactions.