The decline in lead prices far exceeds the fundamentals. Next week, focus on the interaction between costs and consumption [SMM Weekly Lead Market Forecast]

         Next week, on the macro front, attention should be paid to the approaching deadline for the US's "reciprocal tariff" policy. The US is intensifying pressure, and multiple countries are engaging in overnight negotiations in Washington. However, the negotiation situations among various countries have been fluctuating, leading to a strong market pessimism. Domestically, nine departments including the Ministry of Ecology and Environment have jointly issued the "Action Plan for Screening and Rectifying Environmental Safety Hazards of Heavy Metals (2025-2030)", and will conduct screenings and rectifications in five provinces (autonomous regions) including Guangxi, Hunan, Jiangxi, Yunnan, and Guangdong, as well as 21 cities (prefectures) including Sanmenxia in Henan and Qiandongnan in Guizhou. The focus of the screening and rectification will be on heavy metal pollutants such as lead, cadmium, and antimony.

Regarding LME lead, influenced by macroeconomic pessimistic expectations, bears have concentrated their capital injections, coupled with an increase in LME lead inventory, with a weekly increase of nearly 10,000 mt. LME lead has continuously declined, reaching a new low in nearly two months. Meanwhile, the LME lead cash-3M contango has widened to $40.86/mt, which may drag lead prices down continuously. At the same time, the supply contradiction of lead concentrates persists, with an increase in negative TCs transactions. Attention should be paid to the effectiveness of the support from the previous platform of LME lead. It is expected that next week, LME lead will trade within the range of $1,935-$2,015/mt.

Domestically, for SHFE lead, the impact of capital far exceeds that of fundamentals, with SHFE lead declining to a near two-month low. On the lead fundamentals front, both supply and demand expectations are increasing. Additionally, due to the decline in lead prices, the losses of secondary lead have further widened, dampening the enthusiasm of secondary lead smelters for shipping. This has led to an inversion in the prices of secondary refined lead and primary lead. Downstream enterprises have shifted their procurement towards the primary lead market, resulting in a decrease in primary lead enterprise inventories. Next, attention should be paid to the production trends of secondary lead enterprises under loss conditions and whether social warehouse inventories can be reduced. If either of these scenarios materializes, lead prices will have the opportunity to stop falling and rebound. It is expected that next week, the most-traded SHFE lead contract will trade within the range of 16,550-16,900 yuan/mt.

Spot price forecast: 16,500-16,800 yuan/mt. The traditional peak season for the lead-acid battery market in August is approaching, with some enterprises gradually building inventories at low prices, leading to an increase in trading activity in the spot market. Both primary lead and secondary lead enterprises have expectations for varying degrees of production resumptions and output increases. The supply of spot cargoes in the market is relatively loose, and it may be difficult for the spot market to return to premium trading. Among them, due to cost factors, the price inversion between secondary lead and primary lead is temporarily difficult to change.