Tariff Risks Coupled With Supply Increase Expectations, Lead Prices Expected to Pull Back and Consolidate [SMM Lead Morning Meeting Minutes]

Futures Market:

Overnight, LME lead opened at US$2,058/mt. Affected by the uncertainty of the US reciprocal tariff, non-ferrous metals generally weakened, and LME lead also fluctuated downward throughout the day, with the lowest intraday price reaching US$2,031/mt, falling to a nearly two-week low. Near the end of the session, the decline of LME lead slowed down, and it eventually closed at US$2,037.5/mt, down by 0.95%.

Overnight, the most-traded SHFE lead 2508 contract opened at 17,315 yuan/mt. With the resurgence of US tariff risks and the continued accumulation of social inventory of lead ingots, bears increased their positions after the opening, causing SHFE lead to plummet straight down, operating near 17,100 yuan/mt. Meanwhile, the contradiction in domestic raw material supply persisted, with bullish and bearish factors intertwined. In the latter half of the session, SHFE lead remained in a stalemate near 17,100 yuan/mt for a long time until it eventually closed at 17,110 yuan/mt, down by 0.58%. Its open interest reached 51,936 lots, an increase of 891 lots from the previous trading day.

》Click to view historical SMM lead spot quotes

Macro Aspects: The first wave of Trump's tariff letters: The US will impose a 25% tariff on products from Japan and South Korea starting August 1, threatening additional tariffs if retaliatory measures are taken. The White House said Trump postponed the "deadline" for reciprocal tariffs to August 1, and it was reported that no tariff letter would be sent to the EU. Trump announced the imposition of tariffs of up to 40% on products from 12 countries, including South Africa, entering the US. Media reported that the EU would not receive a letter from the US about raising its tariffs; the EU sought to finalise a preliminary trade agreement with the US to lock in US tariffs on the EU at 10% after August 1, in order to further negotiate a permanent agreement. In addition, Goldman Sachs advanced its expectation for the US Fed's interest rate cut by three months: possibly in September, with a terminal interest rate of 3%-3.25%.

Spot Fundamentals:

In the lead spot market yesterday, SHFE lead fluctuated and pulled back. Suppliers maintained discounts for shipments, with warehouse cargoes in the Jiangsu, Zhejiang, Shanghai region quoted at discounts of 80-0 yuan/mt against the most-traded SHFE lead 2508 contract. During this period, electrolytic lead cargoes self-picked up from production sites were quoted at small discounts (against the SMM 1# lead average price). Secondary lead smelters also refused to budge on prices for shipments, with secondary refined lead quoted at discounts of 50-0 yuan/mt against the SMM 1# lead average price, and a few at discounts of 100 yuan/mt. Downstream enterprises purchased as needed, with some rigid demand favoring lower-priced secondary lead. The spot market for primary lead was mediocre.

Inventory: As of July 7, LME lead inventory decreased by 3,300 mt to 259,975 mt. The total social inventory of lead ingots in five regions tracked by SMM reached 57,900 mt, an increase of 1,500 mt from June 30 and an increase of 1,000 mt from July 3.

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Today's Lead Price Forecast:

Recently, lead prices have held up well and operated above 17,000 yuan/mt. Losses in secondary lead have narrowed, and the production enthusiasm of lead smelters has risen. Coupled with the gradual commissioning of new capacity in lead smelting, there has been a phased increase in ingot supply. However, the current improvement in lead consumption is limited and cannot fully absorb the increase in supply. As a result, social inventory of lead ingots continues to rise, dampening the upward momentum of lead prices. Meanwhile, the suspension period for the US reciprocal tariff has ended, becoming the largest uncertainty factor currently affecting the movement of lead prices. It is expected that lead prices will show a pullback and consolidation trend in the short term.