Both supply and demand will increase, lead prices to catch up on gains amid bullish macro sentiment [SMM Lead Morning Meeting Summary]

Futures Market:

Last Friday, LME lead opened at $1,970/mt. During the Asian session, it fluctuated downward. Entering the European session, it initially declined and then rebounded, touching a low of $1,961/mt before rallying to make up for losses. Due to the unexpectedly weak non-farm payrolls data, Trump dismissed the head of the Bureau of Labor Statistics, and expectations for an interest rate cut surged overnight. The US dollar index plunged, releasing pressure on LME lead. It reached a high of $1,981/mt in the tail end of the session and closed at $1,974/mt, up 0.23%.

On Friday evening, the most-traded SHFE lead 2509 contract opened at 16,780 yuan/mt. After briefly touching a high of 16,830 yuan/mt in the early session, it fluctuated downward. During the session, it hit a low of 16,745 yuan/mt and closed at 16,775 yuan/mt, up 0.69%.

Macro Aspects:

The US non-farm payrolls for July recorded a growth of 73,000, far below the expected 110,000. Trump dismissed the head of the Bureau of Labor Statistics due to dissatisfaction with the data, and expectations for an interest rate cut surged overnight! The US ISM manufacturing PMI for July unexpectedly fell to 48, below the expected 49.5, marking a new low since October 2024. The US tariff policy is "basically set".

The Ministry of Finance and the State Taxation Administration will resume collecting VAT on interest income from newly issued government bonds and other instruments starting from August 8. The State Administration of Foreign Exchange: Conduct counter-cyclical adjustments in a timely manner to maintain the stability of the foreign exchange market and safeguard national economic and financial security. The PBOC: Continue to implement a moderately loose monetary policy and increase financing support for key areas such as "implement major national strategies and build up security capacity in key areas" and "program of large-scale equipment upgrades and consumer goods trade-ins".

SHFE lead prices have been declining consecutively. Suppliers have differing views on selling, with some halting shipments and others selling at market prices. During this period, the discounts for cargoes self-picked up from primary lead smelters against the most-traded SHFE lead 2509 contract narrowed further, ranging from a discount of 120-70 yuan/mt to a discount of 30 yuan/mt for a few. In terms of secondary lead, most secondary lead enterprises have halted shipments, with a few quoting secondary refined lead at premiums of 50-100 yuan/mt against the SMM #1 lead average price for factory delivery. Downstream enterprises actively inquired about prices and bought the dip as needed, including cargoes from smelters and social warehouses. Spot market transactions were moderate.

Inventory Aspects: On August 1, LME lead inventory decreased by 1,175 mt to 275,325 mt. As of July 31, the total social inventory of SMM lead ingots in five locations reached 73,000 mt, an increase of 1,300 mt from July 28.

Today's Lead Price Forecast:

In terms of lead fundamentals, both supply and demand expectations are increasing. Additionally, due to the decline in lead prices, losses for secondary lead have further widened, dampening the enthusiasm of secondary lead smelters for selling. Secondary refined lead prices have inverted compared to primary lead. Downstream enterprises are shifting their purchases towards the primary lead market, leading to a decline in primary lead enterprise inventories. The next focus will be on the production trends of secondary lead enterprises under loss conditions and whether social warehouse inventories can be reduced. If one of these expectations is met, there will be an opportunity for lead prices to stop falling and rebound.

Data source statement: 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 model. These data are for reference only and do not constitute decision-making advice.