Difficult to Lower Scrap Prices, Environmental Protection Efforts Resume in South China, Short-Term Lead Prices May Remain Consolidated [SMM Morning Lead Meeting Summary]

Futures Market:

Due to the UK bank holiday, LME lead was closed for one day yesterday and will resume normal trading today.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,760 yuan/mt. As lead warrant inventories reversed their trend and accumulated, SHFE lead initially fluctuated downward, moving to 16,745 yuan/mt. In the latter half of the trading session, following a strong rally in zinc prices, SHFE lead followed suit and rebounded above 16,800 yuan/mt. It finally closed at 16,830 yuan/mt, down 0.06%, with open interest rising by 1,306 lots to 45,638 lots compared to the previous trading day.

》Click to view SMM lead spot historical quotes

Macro: The General Office of the CPC Central Committee and the State Council urged enterprises to improve wage growth mechanisms and supported publicly listed firms in introducing institutional investors with over 5% stakes as active shareholders. After their first call, US and EU leaders postponed Trump’s tariff hike deadline from June 1 to July 9, with the EU pledging to "swiftly and decisively" advance negotiations. Analysts viewed this as "a promising signal" that the EU is "ready to negotiate." Japan reportedly plans to exchange LNG projects and shipbuilding technology for US tariff concessions, aiming for a deal by mid-June. Meanwhile, a US Fed voting member for next year stated the pause in easing may last longer, remaining "uncertain" if conditions are clear enough.

Spot Fundamentals:

In yesterday’s lead spot market, SHFE lead remained range-bound. Suppliers quoted prices in line with the market, with discounts showing no significant changes. In Jiangsu, Zhejiang, and Shanghai, quotations against the SHFE lead 2506 contract were at discounts of 20-0 yuan/mt. Ex-factory prices for primary lead from mainstream producers were quoted at discounts of 20 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price. Secondary lead smelters refused to budge on prices, with secondary refined lead quoted at discounts of 50-0 yuan/mt against the SMM 1# lead price ex-factory, and some at premiums of 50-75 yuan/mt. Downstream enterprises mainly made just-in-time procurement with ample choices, making it difficult for some smelters to sell ex-factory cargoes.

Inventory: As of May 26, LME lead inventories fell by 1,800 mt to 294,025 mt. SMM lead ingot social inventories across five regions totaled 43,400 mt, down 15,700 mt from May 19 and 6,900 mt from May 22.

》Click to view SMM metal industry chain database

Today’s Lead Price Forecast:

Recently, the lead-acid battery market is in the traditional consumption off-season, with limited procurement demand for lead ingots from downstream enterprises. Meanwhile, production at primary and secondary lead firms remains stable or slightly higher, giving downstream buyers more options. Just-in-time procurement favors low-priced cargoes, with primary and secondary lead mostly traded at discounts. The renewed controversy over concentrated price cuts for scrap batteries has led some secondary lead firms to raise purchase prices again. Persistent losses in secondary lead may halt the downward trend in lead prices. In addition, environmental protection checks are currently underway in China. Attention should be paid to changes in lead ingot supply in South China, and it is expected that lead prices will continue to consolidate in the short term.