Macroeconomic Cooling Coupled with Inventory Accumulation Pressure, Lead Prices Continue in the Doldrums [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $2,060/mt. During the European session, it initially fell then rose. Entering the Asian session, a significant increase in LME lead inventory weighed on prices, leading LME lead to fluctuate downward and hit a low of $2,024/mt. Before closing, it saw a slight rise to recoup some losses, finally settling at $2,028/mt, down $36.5/mt or 1.77%.

Overnight, the most-traded SHFE lead contract gap-opened at 17,120 yuan/mt. After lightly touching a high of 17,160 yuan/mt early in the session, it continued its fluctuating trend in the doldrums, hitting a low of 17,130 yuan/mt before consolidating in a narrow range, finally settling at 17,055 yuan/mt, down 175 yuan/mt or 1.02%.

Trump confirmed the plan to increase the national defense budget to $1.5 trillion in 2027. On January 20, US President Donald Trump confirmed the plan to increase the 2027 national defense budget to $1.5 trillion. The January LPR quotations were released: the 1-year LPR was 3.00% and the 5-year+ LPR was 3.50%, both unchanged from the previous month. On January 20, Shanghai released the "Action Plan for Strengthening Futures-Spot Linkage and Enhancing the Capability Grade of Nonferrous Metal Bulk Commodities" to strengthen linked development between markets, jointly enhance Shanghai's resource allocation capability and global pricing influence for nonferrous metal bulk commodities, and support the construction of Shanghai's "Five Centers". According to the Shanghai Municipal Financial Office, the Action Plan mainly consists of three parts containing 18 measures.

Spot Fundamentals:

Warehouse quotations in the Jiangsu, Zhejiang, Shanghai region were scarce. Suppliers were mostly offering cargoes self-picked up from primary lead production sites, generally at discounts. Quotations for mainstream origins against the SMM #1 lead average price were at discounts of 75-0 yuan/mt ex-works. Meanwhile, secondary lead smelters had varying mindsets towards sales, leading to significant regional differences in quotations. Secondary refined lead quotations against the SMM #1 lead average price were at discounts of 200-0 yuan/mt ex-works. However, demand in the lead consumer market was weak. Downstream enterprises maintained a wait-and-see attitude, with only a few making just-in-time procurement. With ample sourcing options available, trading in the spot market was sluggish.

Inventory: On January 20, LME lead inventory increased by 22,075 mt to 225,575 mt. As of January 19, SMM social inventory of lead ingots across five regions continued its accumulation trend.

Today's Lead Price Forecast:

Due to the lack of improvement in consumption performance coupled with domestic lead ingot inventory pressure, the digestion pace of lead ingots in the Chinese market is slow. Spot quotations from mainstream regional smelters are at widening discounts. However, downstream intention to stockpile on price dips is low, with only small amounts of just-in-time procurement occurring. Simultaneously, quotations for mainstream quality imported lead ingots arriving in January against the SMM #1 lead average price also showed a MoM-widened discount. Coupled with reduced shipment willingness from overseas lead ingot suppliers ahead of the Chinese New Year holiday, SMM expects China's lead ingot imports in January will continue their downward trend. Affected by geopolitical tensions and risk-off sentiment, the precious metals market remains hot, while non-ferrous metals generally weakened overnight. In the short term, lead prices may continue to be in the doldrums due to a cooling macro environment and inventory buildup pressure.