Inventory Buildup of Lead Ingots Occurred Synchronously in Domestic and Overseas Markets, with the Center of Lead Price Movement Shifting Downward [SMM Morning Lead Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,987/mt. Trading in the LME lead market was sluggish during the Asian session, with prices consolidating mainly between $1,980-1,985/mt. As the market entered the European session, the US dollar strengthened amid volatility, causing LME lead prices to reverse and pull back. Coupled with the gradual increase in lead ingot inventory, LME lead prices gradually moved towards $1,970/mt. By the end of the session, LME lead prices partially recovered some of their losses, eventually closing at $1,988.5/mt, down 0.28%.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,790 yuan/mt. With the gradual increase in lead ingot warrant inventory on a daily basis, the center of SHFE lead prices shifted further downward. However, prices of raw materials such as scrap batteries rose instead of falling, leading to a mix of bullish and bearish factors. During the latter part of the trading session, SHFE lead prices consolidated within a narrow range of 16,750-16,775 yuan/mt for an extended period. Eventually, SHFE lead closed at 16,765 yuan/mt, down 0.15%, with open interest reaching 47,205 lots, an increase of 1,141 lots from the previous trading day.

》Click to view historical SMM lead spot quotes

Macro: From January to April, profits of China's industrial enterprises above designated size continued to rebound, with a year-on-year increase of 1.4%, accelerating by 0.6 percentage points compared to the January-March period. Trump unusually praised the EU, expressing encouragement over the acceleration of trade negotiations. While Europe is "speeding up" negotiations with the US, it is also threatening US tech companies as potential "targets for retaliation." Hindered by the debt ceiling, the US Treasury Department reduced the scale of short-term debt issuance. Japan's Ministry of Finance conducted an unusual "survey" of the bond market, considering reducing the issuance of ultra-long-term bonds, leading to a sharp rebound in Japanese government bonds. The UK reduced long-term bond issuance and shifted towards relying on short-term bond financing.

Spot Market Fundamentals:

In yesterday's lead spot market, the center of SHFE lead prices shifted slightly downward, and there were no significant changes in the discounts quoted by suppliers. In the Jiangsu, Zhejiang, Shanghai region, prices were quoted at a discount of 10-0 yuan/mt against the SHFE lead 2506 contract. Among them, the mainstream primary lead smelters' cargoes self-picked up from production sites were quoted at a discount of 40 yuan/mt to a premium of 125 yuan/mt against the SMM 1# lead average price on an ex-factory basis. The reluctance of secondary lead smelters to sell at low prices increased, leading to a reduction in quotations. Some spot orders were quoted at a discount of 75-0 yuan/mt to a premium of 50-75 yuan/mt against the SMM 1# lead price on an ex-factory basis. Downstream enterprises purchased on a need basis, buying the dip, with some primarily relying on long-term contracts, and limited spot cargo purchases.

Inventory: As of May 26, LME lead inventory decreased by 1,650 mt to 292,375 mt. The total SHFE lead ingot warrant inventory reached 37,299 mt, an increase of 2,015 mt from the previous day.

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Today's Lead Price Forecast:

In recent days, lead ingot inventory has gradually increased both domestically and overseas. In particular, with the commissioning of new capacity by secondary lead enterprises in the domestic market, supply has shown a steady upward trend. On the one hand, the increase in supply may raise the risk of lead ingot inventory buildup. On the other hand, the rising demand for scrap and other raw materials by smelters has kept raw material costs high. In addition, the off-season trend in the lead-acid battery market remains unchanged, with downstream enterprises generally experiencing production cuts. Coupled with the approaching Dragon Boat Festival holiday, some enterprises have plans to take time off, dragging down short-term lead consumption. It is expected that lead prices will be in the doldrums.