Inventory buildup and supply reduction coexist; lead prices may maintain a consolidation trend [SMM Morning Lead Meeting Summary]

Futures Market:

On Friday, LME lead opened at $1,994.5/mt, showing a pattern of moving downwards after a higher opening. During the Asian session, LME lead fluctuated at highs and continuously attempted to break through the $2,000/mt integer mark, reaching a high of $2,000/mt during the session. However, intensified geopolitical conflicts in the Middle East, coupled with a rise in the US dollar index, caused LME lead to almost surrender all its gains after entering the European session. It eventually closed at $1,992.5/mt, up 0.03%.

On Friday, the most-traded SHFE lead 2507 contract opened at 16,915 yuan/mt. Factors such as production cuts on the supply side and an increase in visible inventory of lead ingots coexisted. After the opening, bulls and bears engaged in a tug-of-war, with SHFE lead consolidating between 16,900-16,950 yuan/mt for an extended period. It eventually closed at 16,920 yuan/mt, down 0.18%. Its open interest reached 43,128 lots, a decrease of 476 lots from the previous trading day.

》Click to view historical SMM lead spot quotes

Macro Aspects: In May, China's social financing increased by 2.29 trillion yuan, new RMB loans reached 620 billion yuan, and new RMB deposits approached 2.18 trillion yuan, with the M2-M1 spread narrowing. Iran launched a large-scale missile attack in retaliation, continuing to exchange strikes with Israel over the weekend, targeting locations including the residence of the Israeli Prime Minister. Iranian officials stated they were seriously considering whether to blockade the Strait of Hormuz. Israel attacked Iran's largest natural gas field, expanding the conflict to oil and gas facilities.

Spot Fundamentals:

In the lead spot market on Friday, SHFE lead surged strongly in the morning, once breaking through the 17,000 yuan/mt mark. Suppliers shipped goods according to market conditions, and as the delivery date approached, some suppliers waited for delivery, with quoted discounts unchanged from the previous day. In the Jiangsu, Zhejiang, Shanghai region, prices were quoted at discounts of 50-0 yuan/mt against the SHFE lead 2507 contract. Additionally, quotes for cargoes self-picked up from primary lead smelters remained firm, especially in South China, where prices were generally quoted at premiums of 50-60 yuan/mt against the SMM 1# lead average price ex-factory. Secondary lead smelters actively quoted and shipped goods, with secondary refined lead quoted at premiums of 0-25 yuan/mt against the SMM 1# lead average price ex-factory, and a few regions offering discounts of 75 yuan/mt. As lead prices rose, downstream enterprises showed a strong wait-and-see sentiment, with fewer inquiries and weaker trading in the spot order market.

Inventory: As of June 13, LME lead inventory decreased by 3,775 mt to 264,975 mt. The total inventory of SHFE lead ingots reached 49,811 mt, an increase of 1,875 mt from the previous week.

》Click to view the SMM Metal Industry Chain Database

Today's Lead Price Forecast:

Today, the SHFE lead 2506 contract will enter delivery, with expectations of an increase in visible inventory due to the transfer of lead ingots to delivery warehouses before delivery remaining. Meanwhile, widespread production cuts and suspensions at secondary lead enterprises, along with maintenance at primary lead enterprises, have tightened supply, pushing lead prices to hold up well. However, it is worth noting that after the rise in lead prices, losses in the secondary lead sector have begun to recover, and the off-season in the lead-acid battery market continues, which may constrain the upside potential of lead prices.