Bearish factors still persist, lead prices encounter resistance or may maintain sideways movement [SMM Morning Lead Meeting Summary]

Futures Market:

Last Friday, LME lead opened at $2,000/mt. During the Asian session, it fluctuated downward, hitting a low of $1,982.5/mt. As the US dollar index was in the doldrums, LME lead rebounded and rallied during the European session, reaching a high of $2,007/mt towards the close. It eventually closed at $2,006/mt, up 0.07%.

On Friday evening, the most-traded SHFE lead 2506 contract opened at 16,885 yuan/mt. It briefly touched a low of 16,865 yuan/mt early in the session. Boosted by the rise in LME lead, it rallied to 16,955 yuan/mt. With mixed long and short positions, SHFE lead gave back some of its gains towards the close, ending at 16,915 yuan/mt, down 0.09%.

》Click to view historical SMM lead spot quotes

Macro Aspects:

Trump stated that new tariffs would be imposed on many countries within the next two to three weeks. US Treasury Secretary Bessent indicated that the US is focusing tariff discussions on 18 key partnerships. If countries do not negotiate in good faith, they will receive a letter containing US tariff rates, which will be at the April 2 levels. The US one-year inflation expectation for May hit its highest level since 1981; consumer confidence dipped slightly to the second-lowest on record but ended a four-month streak of sharp declines. In March, China reduced its US Treasury holdings by $18.9 billion, dropping to third place, while the UK rose to second place.

Spot Fundamentals:

In the Shanghai market, Chihong lead was quoted at 16,935-16,960 yuan/mt, with a premium of 20-30 yuan/mt against the SHFE lead 2506 contract. Honglu lead was quoted at 16,900-16,930 yuan/mt, with a discount of 20-0 yuan/mt against the 2506 contract. In the Jiangsu-Zhejiang region, JCC lead was quoted at 16,900-16,930 yuan/mt, with a discount of 20-0 yuan/mt against the 2506 contract. The center of SHFE lead's price movement shifted downward compared to the previous session. Suppliers shipped goods at market prices, with a few enterprises reluctant to sell at low prices, causing quotes to shift from discounts to premiums. Meanwhile, cargoes self-picked up from primary lead smelters maintained discounts of 50 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price ex-factory. The availability of secondary lead in the market increased slightly, with smelters offering more quotes. Secondary refined lead was quoted at discounts of 120-0 yuan/mt against the SMM 1# lead average price ex-factory. Downstream enterprises primarily made just-in-time procurement, favoring low-priced, heavily discounted cargoes. Trading in the spot market was sluggish.

Inventory: On May 16, LME lead inventory decreased by 1,825 mt to 248,850 mt. As of May 16, the total social inventory of lead ingots across five locations tracked by SMM reached 56,000 mt, up 8,500 mt from May 8 and 8,900 mt from May 12.

》Click to view the SMM Metal Industry Chain Database

Today's Lead Price Forecast:

On the demand side, production at lead-acid battery enterprises remained largely unchanged, with most enterprises primarily purchasing through long-term contracts. The current off-season trend in the lead-acid battery market persists, remaining the biggest bearish factor. Production at primary lead enterprises remained relatively stable. Due to the SHFE lead delivery last week, in-plant inventory has been reduced (including simple transfers). Suppliers have no intention of further expanding discounts for shipments, and spot discounts are expected to remain stable. In the secondary lead sector, as lead prices rebound, losses in secondary lead production have slightly improved, with some enterprises intending to resume operations. Coupled with the commissioning of new capacity, the discounts for secondary refined lead may expand again. Overall, lead ingot supply is expected to increase this week, which may exacerbate inventory buildup. Lead prices are expected to encounter resistance and maintain sideways movement.