Macro expectations are relatively positive, but the improvement in fundamentals is limited. Lead prices may fluctuate at highs [SMM Lead Morning Meeting Summary]

Futures Market:

Last Friday, LME lead opened at $2,026.5/mt. During the Asian session, LME lead fluctuated upward, and coupled with the drawdown in LME lead inventory, the overall center of operation moved higher, reaching a peak of $2,041.5/mt during the period. However, in the tail end of the night session, LME lead reversed its trend and pulled back, surrendering most of its gains, and ultimately closed at $2,020.5/mt, down 0.12%.

Last Friday, the most-traded SHFE lead 2509 contract opened at 16,960 yuan/mt. Driven by the rise in LME lead, SHFE lead surged rapidly to 17,085 yuan/mt at the opening. However, with the cumulative increase in visible inventory of lead ingots and the gradual recovery of supply, SHFE lead pulled back after hitting a high and fell below 17,000 yuan/mt again, ultimately closing at 16,845 yuan/mt, down 0.38%. Its open interest stood at 71,589 lots, a decrease of 1,738 lots from the previous trading day.

Macro Aspects: In June, the YoY decline in profits of industrial enterprises above designated size in China narrowed to 4.3%, with the equipment manufacturing industry playing a prominent supporting role, and the automotive industry's profits growing by 96.8%. The US and the EU reached a trade agreement to impose a 15% tariff. Trump stated that the EU would increase its investment in the US by $600 billion and purchase energy products worth $750 billion. Trump predicted on Friday that most of the agreements would be completed by August, and it was unlikely that Canada would reach a new agreement before the deadline. On Sunday, he mentioned considering reaching agreements with three to four countries. The US is set to impose additional tariffs on lumber: The Trump administration has determined that Canada is dumping softwood lumber. South Korea is preparing for "investment in exchange for tariff reductions," with a proposed investment scale exceeding $100 billion.

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In the spot lead market last Friday, SHFE lead fluctuated upward and rebounded. Due to the limited availability of market-circulating cargoes, some suppliers narrowed their spot discounts, and a few even intended to offer premiums. In the Jiangsu, Zhejiang, and Shanghai regions, cargoes were quoted at discounts of 50-0 yuan/mt against the SHFE lead 2508 contract, or at discounts of 20-0 yuan/mt against the SHFE lead 2509 contract. Downstream enterprises purchased as needed, and with the start of the new month's long-term contracts, actual transactions decreased compared to the previous day. Additionally, there were not many cargoes self-picked up from production sites at primary lead smelters, which maintained premium shipments, but a few high-premium quotations decreased. Mainstream producing areas quoted premiums of 0-100 yuan/mt against the SMM #1 lead average price for factory delivery. Furthermore, the reluctance to budge on prices at secondary lead smelters eased, and secondary refined lead was quoted at premiums of 0-50 yuan/mt against the SMM #1 lead average price for factory delivery.

Inventory: As of July 25, LME lead inventory decreased by 3,050 mt to 266,275 mt. The total weekly inventory of SHFE lead ingots was 63,254 mt, an increase of 919 mt from the previous week.

Today's Lead Price Forecast:

Currently, some major primary lead smelters are still undergoing maintenance and have not fully resumed operations, leading to prominent regional supply tightness. The narrowing of spot discounts and the shift towards premium trading (against the SMM #1 lead average price) may boost lead prices to hold up well. Meanwhile, the progress of production resumptions in the secondary lead sector has been gradually advancing, and there are signs of improvement in the inverted price relationship between secondary refined lead and primary lead. Before the price spread between the two reverses, it will still support the rise in lead prices. If the premium turns into a discount, it means that this factor will no longer be considered a bullish one. Lead prices may maintain a consolidation trend in the short term.