US Fed Cut Interest Rates as Expected, Subsequent Lead Prices to Return to Fundamentals [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $1,983/mt. Ahead of the US Fed's interest rate decision, the market awaited the outcome, resulting in mediocre trading in LME lead. It consolidated within the $1,980-1,990/mt range for most of the session. However, it rebounded at the tail end as the US dollar fell, closing at $1,984/mt, up 0.4%.

Overnight, the most-traded SHFE lead 2601 contract opened at 17,155 yuan/mt. After opening, it pulled back to around 17,090 yuan/mt, pressured by the weakness in LME lead. Meanwhile, open interest in the 2601 contract gradually declined, with positions shifting to the 2602 contract. It eventually closed at 17,095 yuan/mt, up 0.12%. Open interest stood at 38,336 lots, down 979 lots from the previous trading day.

On the macro front:

The US Fed cut interest rates by 25 basis points as expected, but three committee members opposed the move. It still projected one rate cut next year and announced the purchase of $40 billion in short-term bonds. Powell stated that the scale of bond purchases may remain at a high level in the coming months, the labour market is gradually cooling but slower than expected, and the Fed can wait patiently at the current interest rate level. The impact of tariffs is expected to gradually fade next year. The new Fed news agency indicated that the Fed signaled a pause in rate cuts, while the new bond king suggested that today might be Powell's last rate cut during his term. Meanwhile, as silver experienced a historic surge, the Silver Institute released a significant report stating that demand from sectors such as PV, EVs, and data centers is surging, and global silver industrial demand is expected to continue growing over the next five years.

:

In the lead spot market yesterday, the SHFE lead's trading center shifted further downward, nearly breaching the 17,000 yuan/mt level. Suppliers held prices firm to sell, with some quotations narrowing their discounts (against the SHFE lead 2601 contract). Quotations for mainstream origin cargoes self-picked up from production site were at premiums of 0-50 yuan/mt against the SMM #1 lead price. Secondary lead smelters reduced their sales enthusiasm, with secondary refined lead quotations at discounts of 75 yuan/mt to premiums of 25 yuan/mt against the SMM #1 lead average price ex-works. Downstream enterprises maintained purchasing as needed, while some adopted a wait-and-see stance due to price decline concerns. Spot market transactions showed regional differences.

Inventory: As of December 10, LME lead inventory fell by 1,375 mt to 235,550 mt; SHFE lead warrant inventory was 15,429 mt, down 202 mt from the previous trading day.

Today's lead price forecast:

Last night, the US Fed cut interest rates by 25 basis points as expected, easing market wait-and-see sentiment. Meanwhile, domestic and overseas lead ingot inventories continued to decline, lead concentrate TCs fell further in December, while supply of another raw material—scrap batteries—was relatively ample. Bullish and bearish factors coexisted in the market. Subsequently, lead price movements will return to fundamentals and are expected to show a consolidating trend.

Data Source Statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and relying on SMM's internal database model, for reference only and do not constitute decision-making advice.