Macro Bullish Factors and Supply Decline Expectations Support Lead Prices to Hold Up Well [SMM Lead Morning Meeting Summary]

Futures:

Overnight, LME lead and silver markets were closed due to the UK Summer Bank Holiday.

Overnight, the most-traded SHFE lead 2510 contract opened at 16,865 yuan/mt. It initially edged up to a high of 16,905 yuan/mt before weakening and hitting a low of 16,860 yuan/mt. It then slightly rebounded under pressure from the daily moving average, finally closing at 16,875 yuan/mt, up 45 yuan/mt, or 0.27%.

On the macro front, on August 25, US new home sales data for July exceeded expectations after an upward revision in the previous month. Major investment banks, including Barclays, BNP Paribas, and Deutsche Bank, now expect the US Fed to cut interest rates by 25 basis points in September. Meanwhile, Macquarie and Deutsche Bank have revised their forecasts, predicting rate cuts of 25 basis points in September and December, respectively. Shanghai introduced a stimulus policy package for the real estate market: eligible families can purchase unlimited units outside the outer ring, while single adults are subject to the same housing purchase restrictions as resident households. Zheng Shanjie, head of the National Development and Reform Commission, hosted a business symposium to gather opinions and suggestions on expanding domestic demand and stabilizing employment for the formulation of the 15th Five-Year Plan.

Spot fundamentals:

In the Shanghai market, Chihong and JCC lead were quoted at parity with the SHFE 2509 contract; in the Jiangsu-Zhejiang market, Jijin and JCC lead were quoted at discounts of 20~0 yuan/mt against the SHFE 2509 contract. SHFE lead held up well, and suppliers refused to budge on prices. Some quotes narrowed their discounts compared to last Friday. At the same time, electrolytic lead smelters maintained discount quotes for self-picked-up cargoes, ranging from a 50 yuan/mt discount to an 80 yuan/mt premium over the SMM #1 lead average price. In the secondary lead sector, as lead prices rose, secondary lead smelters showed more willingness to sell. Secondary refined lead was quoted at discounts of 100 yuan/mt to premiums of 25 yuan/mt against the SMM #1 lead average price. Downstream enterprises exhibited a strong wait-and-see sentiment, with some waiting for the execution of new long-term contracts and being cautious about spot orders. Inventory: On Monday, the LME market was closed for the UK Summer Bank Holiday, and no inventory data was released. As of August 25, the total social inventory of lead ingots in five regions tracked by SMM stood at 68,300 mt, down 2,700 mt from August 18 and 1,600 mt from August 21.

Lead price forecast for today:

Recently, on the supply side, due to losses and undersupply of scrap, the number of secondary lead enterprises in east China and north China that have cut production or undergone maintenance has increased. By the end of August, some primary lead smelters will enter their regular autumn maintenance, coupled with a tight supply of raw materials such as lead concentrates, leading to an expected decline in refined lead supply in September. With the upcoming SCO summit and military parade, temporary vehicle restrictions will be implemented in parts of central and north China, extending the transportation cycle for lead ingots picked up from smelters. As a result, downstream essential demand will shift to consuming nearby warehouse stocks, causing a decline in social lead inventories. Short-term macro positives, combined with expectations of a decline in supply, may lead to the lead price holding up well.

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