Fundamental resilience dilutes macro weakness, lead prices may consolidate [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $2,006.5/mt. During the Asian session, LME lead consolidated at highs, mostly fluctuating between $1,995-2,000/mt. Entering the European session, geopolitical tensions in the Middle East escalated further, while LME lead inventory surged by over 20,000 mt, reversing all inventory declines since June. LME lead prices fell consecutively, hitting a low of $1,975/mt during the session, erasing all weekly gains, and eventually closing at $1,976/mt, down 1.52%.

Overnight, the most-traded SHFE lead 2507 contract opened at 16,850 yuan/mt. Dragged down by the decline in LME lead, SHFE lead also fluctuated downward after opening and gradually moved near 16,850 yuan/mt. Meanwhile, as domestic supply-side production cuts and suspensions had not yet resumed, lead prices showed certain resilience. SHFE lead eventually closed at 16,870 yuan/mt, down 0.32%, with open interest at 41,012 lots, a decrease of 445 lots from the previous trading day.

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Macro Aspects: Trump warned that US patience is running out, calling on Iran to "surrender unconditionally," and was reported to be considering strikes against Iran. Crude oil prices surged by 5% at one point. "The New Fed Correspondent": If not for tariffs, the US Fed would have cut interest rates this week. US retail sales fell 0.9% MoM in May, the largest decline in two years, mainly dragged down by a decrease in car purchases.

Spot Market Fundamentals:

In yesterday's spot lead market, SHFE lead maintained a high consolidation trend. Suppliers quoted prices in line with the market, and due to limited available cargoes, there were not many quotes. In the Jiangsu, Zhejiang, Shanghai region, quotes were at discounts of 30-0 yuan/mt against the SHFE lead 2507 contract. Additionally, quotes for cargoes self-picked up from primary lead smelters saw a decrease in premiums, with mainstream production areas quoting at discounts of 30 yuan/mt to premiums of 50 yuan/mt against the SMM 1# lead average price. Secondary lead enterprises increased their quotes, with secondary refined lead quoted at discounts of 75-0 yuan/mt against the SMM 1# lead average price, and some at premiums of 25-75 yuan/mt. Downstream enterprises maintained just-in-time procurement, but consumption was relatively dispersed, resulting in mixed spot market transactions.

Inventory: As of June 17, LME lead inventory surged by 23,975 mt to 287,450 mt, almost reversing all lead ingot inventory declines since June, with total inventory returning to parity with the level at the end of May. SHFE lead ingot warrant inventory stood at 45,503 mt, unchanged from the previous day.

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Today's Lead Price Forecast:

Overseas geopolitical policy tensions are prominent, and today is the eve of the US Fed's interest rate decision. The market needs to pay attention to the impact of macro policy changes on lead prices. On the fundamental side, domestic secondary lead smelters' production cuts have not yet resumed, while primary lead enterprises have added maintenance, leading to reduced output. Supply tightening has led to a tightening of available cargoes in the spot market, with smelters' in-plant inventory declining, supporting lead prices to maintain a high consolidation trend. Meanwhile, we still need to be vigilant about the impact on prices of the possibility of smelters resuming production after the rebound in lead prices and the recovery of losses in secondary lead smelting.