Positive macro environment and cost support allow lead prices to hold up well [SMM Lead Morning Meeting Summary]

Futures:

Overnight, LME lead opened at $2,000.5/mt. It rose slightly during the Asian session and then traded sideways around the $2,000/mt level during the European session before rising again. After a slight correction, it closed at $2,016/mt, up $18.5/mt or 0.93% from the previous close.

Overnight, the most-traded SHFE lead contract opened at 16,940 yuan/mt. It dipped slightly to 16,935 yuan/mt early in the session before rising to 16,975 yuan/mt. It then pulled back slightly and traded sideways above the daily average price, eventually closing at 16,960 yuan/mt, up 40 yuan/mt or 0.24% from the previous close.

Macro: The YoY increase in the US CPI was lower than market expectations, prompting traders to increase their bets on an interest rate cut next month. US tariff revenue hit a new high in July, but the new inflows failed to prevent the budget deficit from widening further that month, indicating that the federal government still faces fiscal challenges. Domestically, nine departments issued the Implementation Plan for Loan Interest Subsidy Policy for Service Industry Business Entities.

Spot fundamentals:

In the Shanghai market, Chihong and Honglu lead were quoted at discounts of 30-20 yuan/mt against the SHFE lead 2509 contract. In the Jiangsu-Zhejiang market, Jijin and JCC lead were quoted at discounts of 40-30 yuan/mt against the SHFE lead 2509 contract. Benefiting from positive macroeconomic policy news, SHFE lead held up well, approaching the 17,000 yuan/mt level again. Suppliers shipped goods according to market conditions, with some waiting for delivery as the delivery date approached, leading to a decline in their quoting enthusiasm. Meanwhile, there were still regional supply differences in cargoes self-picked up from production site at primary lead smelters. Some suppliers expanded their discounts to ship goods, while others held firm in their quotes due to limited spot availability. Mainstream regions saw quotes at discounts of 20 yuan/mt to premiums of 60 yuan/mt against the SMM #1 lead average price ex-works, or at discounts of 170-100 yuan/mt against the SHFE lead 2509 contract. For secondary refined lead, smelters' shipping enthusiasm improved, with secondary refined lead quoted at premiums of 0-50 yuan/mt against the SMM #1 lead average price ex-works. Additionally, as lead prices rose, downstream enterprises increased their inquiries, with some purchasing on demand and others adopting a wait-and-see attitude due to concerns about high prices.

Inventory: On August 12, LME lead inventory decreased by 3,550 mt to 262,250 mt, with the decline mainly coming from Singapore warehouses. According to SMM, as of August 11, the total social inventory of lead ingots in five regions tracked by SMM reached 70,000 mt, down 1,900 mt from August 4 and 1,100 mt from August 7.

Today's lead price forecast:

Lead prices have rebounded and strengthened amid a positive macroeconomic atmosphere and strong cost support. The shipping intention for secondary refined lead has improved compared to yesterday. Although smelters are still mainly quoting at premiums, some suppliers have offered cargoes self-picked up from production site at slight discounts. Attention should be paid to changes in the supply of secondary refined lead in Hebei in late August. The peak consumption season for the downstream lead-acid battery sector has been slow to materialize, with general enthusiasm for raw material stocking and a continued focus on just-in-time procurement, with many adopting a wait-and-see attitude. As the delivery date for the SHFE lead 2508 contract approaches, traders have no short-term intention to expand discounts for shipments, and lead prices may continue to hold up well.