Lead prices continue to fall, with subsequent focus on the cost support of secondary lead [SMM Morning Lead Meeting Summary]

Futures Market:

Overnight, LME lead opened at US$1,990/mt. Under the pressure of a weak macro front and high inventory, bears continued to increase their positions after the opening, causing LME lead to fluctuate downward throughout the day, with the lowest price reaching US$1,963/mt, a new low in nearly two months. LME lead eventually closed at US$1,969.5/mt, down 1.13%, recording six consecutive days of decline.

Overnight, the most-traded SHFE lead 2509 contract opened at RMB 16,705/mt. After the opening, bears entered the market in a concentrated manner, causing SHFE lead to drop rapidly to RMB 16,630/mt. During this period, due to the losses in secondary lead production, the tug-of-war between longs and shorts intensified, but the downward trend remained unchanged, with the lowest price reaching RMB 16,615/mt, a low in nearly two months. SHFE lead eventually closed at RMB 16,650/mt, down 0.95%, with its open interest reaching 76,262 lots, an increase of 3,631 lots from the previous trading day.

Macro Front:

As the tariff deadline approaches, the US intensifies pressure, prompting multiple countries to rush to Washington for overnight negotiations. Trump announces a 90-day extension of the US-Mexico tariff agreement, causing the Mexican peso to hit a new daily high and stock indices to turn positive. Trump threatens a 25% tariff, causing Indian stock markets to fall, with pharmaceuticals and consumer electronics bearing the brunt. The US Secretary of Commerce announces "trade agreements with Cambodia and Thailand," but does not disclose tariff rates.

In yesterday's spot lead market, the center of SHFE lead prices moved further downward. Suppliers had differing views on selling, with some choosing to suspend quoting while others actively sold. There were not many spot cargoes quoted in social warehouses. In the Jiangsu, Zhejiang, Shanghai region, spot cargoes were quoted at premiums of -50~0 yuan/mt against the SHFE lead 2509 contract. Smelter cargoes self-picked up from production sites were quoted at parity with the SMM #1 lead average price, with some even negotiated at premiums of -30~-20 yuan/mt. Additionally, secondary lead smelters suffered significant losses, leading to a strong reluctance to sell at low prices and a decrease in selling enthusiasm. Quotations were significantly fewer than yesterday, with a few quoted at premiums of 25~100 yuan/mt against the SMM #1 lead average price. Downstream enterprises bought the dip as needed, with more inquiries. Due to price advantages, they preferred primary lead cargoes, and market transaction activity improved.

Inventory: As of July 31, LME lead inventory increased by 125 mt to 276,650 mt. The total social inventory of lead ingots in five regions tracked by SMM reached 73,000 mt, an increase of 1,600 mt from July 24 and 1,300 mt from July 28.

Today's Lead Price Forecast:

The macro front is weak, with a large influx of bearish funds into the futures market, causing domestic and overseas lead futures to decline successively. Looking at the fundamentals, this week saw the resumption of production and the commissioning of new capacity at primary lead and secondary lead enterprises, leading to a phased increase in supply. The available spot market cargoes increased significantly compared to last week, and the spot lead premium gradually decreased to parity (against the SMM #1 lead average price). Meanwhile, the overall price center of lead moved downward. In the second half of the week, downstream enterprises' purchasing enthusiasm improved relatively, and they preferred to purchase cargoes self-picked up from smelters with price advantages. The inventory at smelters continued to decline compared to last week, and market activity improved. Additionally, as lead prices fell, the losses in secondary lead smelting further widened. As of yesterday, the loss per mt was 600-800 yuan/mt. The production and shipping sentiment of secondary lead enterprises declined significantly, and the prices of some secondary refined lead have inverted compared to primary lead. We will continue to monitor the supportiveness of secondary lead costs to lead prices.

Data Source Disclaimer: Except for publicly available information, all other data are processed by SMM based on publicly available information, market exchanges, and relying on SMM's internal database models. These data are for reference only and do not constitute decision-making advice.