Funds Drive Lead Prices Higher on Both SHFE and LME, but Beware of the Drag on Lead Prices from Long-Short Dynamics in the Spot Market [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened higher with a gap at $2,086/mt. During Asian trading hours, prices fluctuated rangebound near the daily average. Entering European trading hours, the consolidation pattern continued. In the final session, driven by bullish funds, LME lead steadily strengthened, hitting a high of $2,102/mt—a fresh 11-month peak—before closing at $2,096.5/mt, up $11/mt (0.53%) and recording a three-day winning streak.

Overnight, the most-traded SHFE lead 2603 contract opened higher with a gap at 17,585 yuan/mt. After a slight correction early in the session, it rose steadily in a unilateral trend, pushed by concentrated bullish fund inflows, reaching a high of 17,760 yuan/mt. Subsequently, it fluctuated at highs and found support at the five-day moving average, closing at 17,710 yuan/mt, up 160 yuan/mt (0.91%) and achieving a three-day winning streak.

On the macro front:

Initial US jobless claims fell below expectations, while the November import price index posted its largest increase since April 2024. Sources said the Bank of Japan (BOJ) is likely to keep interest rates unchanged in January, with heightened focus on the weakening yen compared to the past. The central bank unveiled eight measures to strengthen support through structural monetary policy tools, including cutting rates on various structural tools by 0.25 percentage points and lowering the minimum down payment ratio for commercial property loans to 30%. BOJ Deputy Governor Zou Lan stated there is still some room for RRR cuts and interest rate cuts this year.

:

Honglu lead in Shanghai was quoted at 17,605-17,615 yuan/mt, while lead warrant cargoes in Jiangsu and Zhejiang were quoted at 17,455 yuan/mt. SHFE lead held up well, with suppliers adjusting shipments accordingly. However, spot order quotations remained limited, with most transactions involving cargoes self-picked up from primary lead smelters. The spread between futures and spot prices widened further, with some quotations at discounts exceeding 200 yuan/mt. Mainstream producer quotations were at discounts of 50-0 yuan/mt against the SMM #1 lead average price ex-works. Mainstream tax-inclusive spot order quotations for refined lead were at discounts of 250-100 yuan/mt against the SMM #1 lead average price, while tax-exclusive refined lead was quoted at 15,850-15,900 yuan/mt ex-works. Suppliers generally reported weak purchase willingness from downstream buyers, with sluggish lead ingot transactions. Downstream battery enterprises noted rising finished battery inventories and some production cut intentions, leading to subdued raw material demand.

Inventory: On January 16, LME lead inventory dropped by 3,800 mt to 211,400 mt. As of January 12, social inventory of lead ingots across five regions tracked by SMM showed an upward trend.

Today’s lead price forecast:

Lead prices continue to fluctuate at highs, resulting in declining inquiry and purchase willingness among battery producers. Secondary lead smelters are consequently facing sales pressure for lead ingots, with in-factory inventory gradually accumulating. Although tight supply of raw materials such as lead concentrates continues to provide some support for lead prices, recent improvements in the arrival of scrap battery raw materials at secondary lead enterprises, coupled with weakening demand for lead ingot procurement from battery companies, have resulted in a mix of bullish and bearish factors in the market. The risk of further weakening in lead prices is increasing.

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