The peak consumption season remains to be verified, and lead prices are in the doldrums [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at US$2,022/mt. After opening, it came under pressure from the intraday average line and fluctuated downward all the way. Before the market closed, it hit a low of US$2,001/mt and finally closed at US$2,005/mt, down US$12/mt or 0.59%. Bulls reduced their positions and exited the market for several consecutive days, and LME lead recorded three consecutive days of decline. Overnight, the most-traded SHFE lead contract opened at RMB 17,060/mt. After hitting a low of RMB 17,005/mt in the early session, it fluctuated upward and reached a high of RMB 17,080/mt. After that, it came under pressure and pulled back to near the intraday average line, finally closing at RMB 17,035/mt, down RMB 25/mt or 0.15%.

Macro: Overnight news, US President Trump will announce a US$70 billion artificial intelligence and energy investment plan in Pennsylvania on Tuesday. According to a notice from the Federal Register, the US Department of Commerce initiated a Section 232 investigation on imported drones and their parts on July 1. If the investigation concludes that they pose a threat to national security, the President may impose tariffs on these goods.

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Spot Fundamentals:

In the Shanghai market, Chihong lead was quoted at a discount of RMB 10-0/mt against the SHFE lead 2508 contract. In the Jiangsu, Zhejiang, Shanghai market, Jijin and JCC lead were quoted at a discount of RMB 20-10/mt against the SHFE lead 2508 contract. The center of SHFE lead operation moved further downward. Coupled with the approaching delivery, some suppliers waited for delivery, and their enthusiasm for quoting prices declined slightly. At the same time, some downstream enterprises purchased as needed, and their purchases were more inclined towards cargoes self-picked up from production sites of smelters. The mainstream production areas were quoted at a premium of RMB 0-100/mt ex-factory. The spread between futures and spot prices narrowed simultaneously. In addition, secondary lead smelters refused to budge on prices when shipping goods, but there were regional differences. Secondary refined lead was quoted at a discount of RMB 50-0/mt ex-factory against the SMM 1# lead average price, and a few were quoted at a premium of RMB 50-75/mt. Downstream enterprises either waited cautiously and mainly received goods through long-term contracts, or purchased as needed at low prices, preferring low-priced cargoes. The trading of cargoes in warehouses in Jiangsu, Zhejiang, Shanghai was sluggish for both buyers and sellers.

Inventory: As of July 14, LME lead inventory increased by 11,575 mt to 260,950 mt. The total social inventory of SMM lead ingots in five regions reached 63,400 mt, an increase of 5,600 mt from July 7 and an increase of 2,400 mt from July 10.

Today's Lead Price Forecast:

As the delivery of the SHFE lead 2507 contract approaches, downstream enterprises' purchases are more inclined towards cargoes self-picked up from production sites of smelters with relatively low prices. Suppliers continue to transfer inventory to delivery warehouses, and unreported inventory is expected to be revealed as scheduled, dragging down lead prices. However, in terms of supply, the new capacity of primary lead enterprises in Central China has not been put into operation as expected in recent days, and unplanned maintenance has occurred, resulting in a regional tight supply of lead ingots. Delivery brand enterprises have limited deliverable cargoes, and the increase in lead ingot inventory transfer has slowed down. After lead prices weakened, some suppliers adopted a wait-and-see attitude and were reluctant to sell. The support at the 17,000 yuan per tonne level for lead prices was moderate. Peak season consumption still needs to be verified. In the short term, lead prices may continue to be in the doldrums.

Data source statement: Except for publicly available information, all other data are based on publicly available information, market exchanges, and rely on SMM's internal database models, which are processed by SMM. They are for reference only and do not constitute decision-making advice.

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