Tight short-term supply offset by expected subsequent increase; lead prices may remain in consolidation trend [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $2,020/mt. Trading in LME lead was sluggish during the Asian session, with prices basically consolidating between $2,015-2,020/mt. Entering the European session, LME lead gradually fluctuated upward. Especially after the decline in lead inventory, LME lead once again rose to $2,040/mt, but failed to hold above this level. By the end of the session, it had given up most of its gains, ultimately closing at $2,017.5/mt, down 0.15%, and recording three consecutive days of losses.

Overnight, the most-traded SHFE lead 2509 contract opened at 16,985 yuan/mt. In the early session, due to the ongoing regional tightness in domestic supply, the overall price center of SHFE lead shifted upward, touching the 17,000 yuan/mt mark. However, with the accumulation of lead warrant inventory and the commissioning of new secondary lead capacity, bullish momentum waned. In the latter half of the trading session, SHFE lead gave up some of its gains, ultimately closing at 16,945 yuan/mt, up 0.03%. Its open interest stood at 68,671 lots, a decrease of 1,875 lots from the previous trading day.

Macro Aspects: The China-US economic and trade talks commenced in Stockholm, Sweden. According to Xinhua News Agency, on July 28 local time, the economic and trade teams of China and the US held economic and trade talks in Stockholm, Sweden. Additionally, the US Treasury Department's borrowing expectations for Q3 exceeded $1 trillion, an 82% increase, with accelerated issuance of bonds following the increase in the debt ceiling.

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In yesterday's lead spot market, SHFE lead maintained a consolidation trend. Suppliers shipped goods according to market conditions, with some offering at discounts and others narrowing discounts by refusing to budge on prices. In the Jiangsu, Zhejiang, Shanghai region, 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. However, downstream enterprises showed limited enthusiasm for inquiries, resulting in limited transactions in the Jiangsu, Zhejiang, Shanghai region. Additionally, inventory at primary lead smelters was low, with cargoes self-picked up from production sites quoted firmly, mostly at premiums of 50-100 yuan/mt against the SMM #1 lead average price. On the secondary lead front, due to the recovery in supply, premium quotations for secondary refined lead decreased, with offers at premiums of 0-50 yuan/mt against the SMM #1 lead average price.

Inventory: As of July 28, LME lead inventory decreased by 2,625 mt to 263,650 mt. The total social inventory of lead ingots in five locations tracked by SMM reached 71,700 mt, an increase of approximately 300 mt from July 21 and an increase of approximately 300 mt from July 24.

Lead Price Forecast for Today:

Recently, primary lead smelters have not fully recovered from maintenance, with supply remaining tight in some regions. The spot cargo shipments of primary lead smelters are limited, resulting in limited cargoes that can be delivered to social warehouses. Meanwhile, production at secondary lead smelters has gradually resumed. The SMM weekly operating rate of secondary lead smelters has been increasing in recent weeks, which has, to a certain extent, filled the supply gap and achieved a relative balance with lead consumption. From a price perspective, cargoes in Jiangsu, Zhejiang, and Shanghai warehouses are quoted at discounts of 30-0 yuan/mt against the SHFE lead 2509 contract for self pick-up, which is higher than the self-picked-up-from-production-site prices of lead smelters. Downstream enterprises prefer to purchase cargoes self-picked-up-from-production-site from lead smelters. Therefore, inventory changes in social warehouses have been relatively small, with a slight increase. In addition, maintenance at primary lead smelters is expected to end soon. Coupled with the resumption of production at secondary lead enterprises and the advancement of new capacity commissioning, if lead consumption does not significantly improve, it is not ruled out that social inventory of lead ingots will continue to accumulate, thereby dragging down lead prices.