Cost support for lead prices weakens, with strong short-term bearish forces [SMM Morning Lead Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,975/mt, touched a high of $1,977/mt in the Asian session before diving, reaching a low of $1,947.5/mt in the European session. It then rallied towards the close, ending at $1,964/mt, down 0.73%.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,685 yuan/mt, touched a low of 16,655 yuan/mt in early trading before fluctuating rangebound, with a high of 16,715 yuan/mt. It closed at 16,695 yuan/mt, down 0.51%.

》Click to view SMM historical spot lead quotations

Macro Aspects:

Trump's tax reform bill narrowly passed the House of Representatives and was sent to the Senate for review. Federal Reserve Governor Waller stated that if tariffs decline, the Fed is expected to cut interest rates in the second half of 2025. During a meeting with Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co., Chinese Vice Premier He Lifeng noted that China welcomes US companies to deepen mutually beneficial cooperation with China and promote the healthy, stable, and sustained development of China-US economic and trade relations. The People's Bank of China announced that it would conduct a 500 billion yuan Medium-term Lending Facility (MLF) operation on Friday through fixed-quantity, interest-rate tendering, and multiple-price bidding, with a one-year tenor.

Spot Market Fundamentals:

The center of SHFE lead prices has gradually moved lower, with some suppliers expanding their discounted quotations. Meanwhile, ex-factory quotations for cargoes self-picked up from primary lead smelters have maintained a range of discounts of 30 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price. The secondary lead market has seen chaotic quotations, with some regions offering secondary refined lead at discounts of 140-50 yuan/mt to the SMM 1# lead price, and a few at premiums of 50-75 yuan/mt. Downstream enterprises have shown strong wait-and-see sentiment, with some purchasing as needed at lower prices. Regional spot market transactions have improved slightly.

Inventory: On May 22, LME lead inventory increased by 13,700 mt to 295,825 mt. As of May 22, the total social inventory of lead ingots across five locations tracked by SMM reached 50,300 mt, down 5,700 mt from May 15 and 8,800 mt from May 19.

》Click to view SMM Metal Industry Chain Database

Today's Lead Price Forecast:

After the delivery of SHFE lead contracts last week, electrolytic lead supplies have re-entered the market this week. Some downstream enterprises have prioritized nearby procurement, leading to significant reductions in social inventory in the Jiangsu, Zhejiang, and Tianjin regions. Meanwhile, with the advancement of new capacity and production resumptions in the secondary lead sector, expectations for supply growth have risen. However, the off-season trend in the lead-acid battery market persists. It is expected that after the supply growth materializes, the decline in social lead ingot inventory may slow down. Due to the significant reduction in raw material procurement quotations for secondary lead, the cost support for lead prices has weakened, with short-term bearish sentiment remaining strong.