Lead prices rose slightly, with limited rigid demand from downstream enterprises and light trading activity [SMM Morning Lead Conference Summary]

Futures Market:

Overnight, LME lead opened at $1,985/mt. During the Asian session, it edged higher. Entering the European session, it initially dipped before rallying to a high of $1,994.5/mt. It then hit a low of $1,979.5/mt before the close and finally settled at $1,984/mt, down $2/mt or 0.1%.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,680 yuan/mt. It consolidated near the 16,700 yuan/mt level under pressure in early trading before rallying to a high of 16,765 yuan/mt. It then underwent a slight correction and finally closed at 16,725 yuan/mt, up 90 yuan/mt or 0.54%.

On the macro front, data released by ADP Research on the evening of June 4 showed that US ADP employment increased by 37,000 in May, the lowest level since March 2023 and significantly below the expected 114,000. Following the release of the sharply slowing employment data, the market is reassessing the US Fed's monetary policy stance. On the 4th local time, Russian President Putin, after hearing a report from Medinsky, the head of the Russian delegation, said that Russia would not accept a 30-day or 60-day ceasefire proposed by Ukraine. Putin stated that such a move would allow Ukraine to catch its breath and regroup militarily.

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Spot Market Fundamentals:

In the Shanghai market, Chihong and Honglu lead were quoted at discounts of 20-0 yuan/mt against the SHFE lead 2506/2507 contracts. After the SHFE lead rallied and then pulled back in early trading, suppliers shipped goods at market prices, with some offering quotes at small discounts. Among them, the quotes for cargoes self-picked up from production sites at electrolytic lead smelters in major producing areas were at discounts of 60 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price ex-factory. Discounts in South China further widened, while those in North China narrowed, leading to greater regional disparities. Secondary lead smelters showed poor enthusiasm for shipping, with spot orders quoted at premiums of 0-100 yuan/mt against the SMM 1# lead price ex-factory, and a few traders offering quotes at discounts of 50-0 yuan/mt ex-factory. After the holiday, downstream enterprises had limited immediate demand. Following some buying the dip yesterday, they reduced inquiries today, and market transactions turned sluggish again.

On the inventory front, according to SMM, as of June 3, the total social inventory of lead ingots in five regions tracked by SMM reached 49,900 mt, an increase of 6,500 mt from May 26 and over 400 mt from May 29. As of June 4, LME lead inventory decreased by 1,600 mt to 281,550 mt.

Today's Lead Price Forecast:

Recently, domestic lead prices have rebounded after testing bottom support but continue to exhibit a weak oscillating trend. Downstream enterprises are mostly observing with limited immediate restocking. On the raw material front, primary lead smelters have not yet entered their routine maintenance period from June to August in early June. Coupled with a decline in imported ore supply, the supply-demand gap for raw materials such as lead concentrates has widened, and quotes for TCs of imported lead concentrates in June have shown signs of another decline. In terms of secondary refined lead, although there was a slight recovery in secondary refined lead production in June MoM from May, if market conditions continue to be sluggish, there may be new enterprises halting production for maintenance or enterprises postponing their production resumption plans. The impact of raw material procurement prices and profit/loss situations of smelters on production enthusiasm will still need to be considered in the future.

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