Production Cuts in Secondary Lead and Transportation Restrictions Intertwined, Short-Term Lead Prices May Continue to Consolidate [SMM Lead Morning Meeting Summary]

Futures:

Overnight, LME lead opened at $1,978.5/mt, continuing the consolidation pattern of the previous trading day throughout the day. During the Asian session, LME lead fluctuated at highs between $1,975 and $1,985/mt. In the afternoon, LME lead pulled back from highs, especially after the US dollar index strengthened, with the center of LME lead's operation moving below $1,970/mt. Overnight, LME lead attempted to recover losses but failed, ultimately closing at $1,970/mt, down 0.53%.

Overnight, the most-traded SHFE lead 2509 contract opened at 16,755 yuan/mt. Lead warrant inventory fell by over 1,000 mt, and SHFE lead gradually fluctuated upward, reaching a high of 16,800 yuan/mt during the session, ultimately closing at 16,790 yuan/mt, up 0.18%. Its open interest reached 42,843 lots, a decrease of 1,387 lots from the previous trading day. Additionally, the SHFE lead 2509 contract has been gradually shifting to the 2510 contract in recent days. Pay attention to the change of the most-traded contract.

Macro:

Before Fed Chairman Powell's speech at the Jackson Hole Symposium, a Fed voter for next year said that there might not be an interest rate cut in September, and this year's voter hesitated to take action. Subsequently, the two-year US Treasury yield approached a three-week high. Fed Chairman candidate Bullard suggested an aggressive approach: a 100-basis-point interest rate cut this year, with the first action in September. The US and Europe reached an agreement on the framework of a trade deal. The US reiterated a 15% tariff cap on the EU and stated that tariffs on EU cars might be reduced within a few weeks.

In the lead spot market yesterday, SHFE lead stopped falling and rebounded. Suppliers' enthusiasm for selling increased, with more quotations compared to the previous day, and the discounts also widened. In the Jiangsu, Zhejiang, Shanghai region, quotations were at premiums of -50 to 0 yuan/mt against the SHFE lead 2509 contract. Meanwhile, primary lead smelters were actively selling, with mainstream production areas' quotations at premiums of -50 to 80 yuan/mt against the SMM #1 lead average price on an ex-factory basis. However, downstream enterprises' purchasing enthusiasm was average, with some continuing to use inventory. Spot market transactions were sluggish. Regarding secondary lead, smelters' reluctance to sell at low prices eased, with more quotations. Secondary refined lead quotations were at premiums of -50 to 25 yuan/mt against the SMM #1 lead average price on an ex-factory basis, with actual transactions leaning towards discounts.

Inventory: As of August 21, LME lead inventory decreased by 1,500 mt to 279,600 mt. The total social inventory of SMM lead ingots in five regions reached 69,900 mt, a decrease of 1,900 mt from August 14 and a decrease of 1,100 mt from August 18.

Lead price forecast for today:

After this week's delivery, goods will re-enter the circulation market, and the supply of goods in the spot market will be relatively loose, with an increase in primary lead transactions at discounts. At the same time, smelters in Anhui, a major production area for secondary lead, were mostly in a state of reduced or halted production. The regional supply of lead ingots remained tight, and due to losses, the prices of secondary lead and primary lead experienced an inversion, leading downstream enterprises to prefer purchasing primary lead. Especially when lead prices fell this week, some downstream enterprises purchased as needed and accepted supplies from nearby warehouses, further reducing social inventory of lead ingots. Currently, in the Tianjin area, vehicle restrictions are in place on certain sections due to the SCO summit, and after August 23, regions such as Henan will also enter a period of vehicle transportation control, which may affect the inflow and outflow of lead ingots at some warehouses.

Data Source Statement: Apart from publicly available information, other data is processed by SMM based on public information, market exchanges, and SMM's internal database model, and is provided for reference only and does not constitute decision-making advice.