Lead Prices Move Sideways, Spot Trading Slows Down Approaching Year-End [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $1,986/mt, trading in the doldrums during the Asian session. Upon entering the European session, it moved sideways around the daily moving average before weakening again to probe a low of $1,965/mt. It saw a slight rebound just before closing, ultimately settling at $1,970/mt, down $14.5/mt, or 0.73%.

Overnight, the most-traded SHFE lead contract opened at 16,920 yuan/mt. It started weak, probing a low of 16,915 yuan/mt before rising to move sideways around the daily moving average. After briefly touching a high of 17,005 yuan/mt, it pulled back slightly, ultimately settling at 16,960 yuan/mt, up 5 yuan/mt, or 0.03%.

On the macro front: US President Trump is expected to designate the new US Fed chair in the first week of January next year. Powell's four-year term as chair expires in May next year, and Trump previously indicated he wants to select a successor who supports growth-friendly monetary policy. Precious metals experienced another explosive rally. On December 22, both gold and silver hit record highs. Spot platinum surged 7%, climbing back above $2,100/oz for the first time since the financial crisis. China's December LPR was released, with the 1-year rate at 3.0% and the 5-year and above LPR at 3.5%, both remaining unchanged for the seventh consecutive month.

Spot fundamentals:

In the Shanghai region, south China lead was quoted at premiums of 50-70 yuan/mt against the SHFE lead 2601 contract. SHFE lead futures held up well, while most suppliers had already cleared their December lead ingot inventories last week, resulting in scarce market quotations with only a few premium offers. Additionally, cargoes self-picked up from primary lead production sites were also limited, with reduced circulating supply in the more northern parts of north China, while south China still had some circulating supply. Major producing areas quoted at premiums of 0-100 yuan/mt against the SMM #1 lead average price, ex-works. As the year-end approaches, procurement by large enterprises has successively decreased, and they plan to close their books, with only some essential purchasing.

Inventory: On December 22, LME lead inventory decreased by 2,675 mt to 255,950 mt. According to SMM, as of December 22, the total social inventory of lead ingots across five regions tracked by SMM fell to 20,200 mt, down 1,800 mt from December 15 and down approximately 300 mt from December 18.

Today's lead price forecast:

This week coincides with the approach of year-end. Considering factors such as capital repatriation and subsequent book closing, most upstream and downstream enterprises in the lead industry chain completed their transactions in advance last week and are successively closing their books for inventory counting this week. Most suppliers and downstream enterprises have completed their annual inventory clearance and year-end stocking demand, respectively. As December lead ingot inventories were largely sold out early, downstream enterprises have been picking up goods as needed, leading to a simultaneous decline in social warehouse inventory and smelter inventory, causing the social inventory of lead ingots to continue its downward trend. With the resumption of production at secondary refined lead smelters and the slowdown in procurement pace by large downstream enterprises, the decline in social warehouse inventories may be relatively limited.