Macro risks persist and fundamental support is limited, lead prices are expected to continue to stay in the doldrums [SMM Lead Market Weekly Forecast]

         Next week, several key economic data will be released, mainly including China's official manufacturing PMI for June, the US June ADP employment figure, the US June unemployment rate, and the US June seasonally adjusted non-farm payrolls. Recently, US-Iran diplomacy achieved a phased breakthrough, with both sides signing a memorandum of understanding, leading to the reopening of the Strait of Hormuz to shipping and the recovery of crude oil and other supplies. However, conflicts along the Lebanon-Israel border have been recurring, and the ceasefire agreement remains fragile, necessitating cautious optimism. Additionally, short-term inflation data and hawkish signals pushed up expectations for US Fed interest rate hikes, while market views diverged and conflicted, requiring closer attention to next week's economic data outcomes.

As for LME lead, affected by the lifting of shipping restrictions in the Middle East and expectations for US Fed interest rate hikes, market bearish sentiment surged, and LME lead prices fell continuously, nearly breaking below $1,900/mt. While lead prices were declining, the LME Cash-3M contango widened, with the latest quote at -$33.6/mt. Notably, LME lead inventories have been on a downtrend for four consecutive weeks, with total inventories dropping below 300,000 mt, the latest figure at 297,500 mt. It is expected that short-term macro risk factors still exist, and fundamental factors present contradictions. Lead prices are expected to remain in the doldrums, with LME lead forecast to trade between $1,875 and $1,945/mt.

As for SHFE lead, entering July, with the semiannual capital repatriation factor removed, upstream and downstream enterprises will resume regular trading. Meanwhile, supplies of lead concentrates and scrap batteries remain constrained, with secondary lead enterprises incurring significant losses. Production resumptions have been delayed, and there are additional production cuts. Coupled with the persistent inversion between secondary and primary lead prices, these factors will provide support for lead prices in the short term. However, we also need to be vigilant about macro bearish factors, with lead prices expected to be in the doldrums, while watching the lead ingot import window. The most-traded SHFE lead contract is expected to trade between 15,950 and 16,400 yuan/mt.

Spot price forecast: 15,950-16,250 yuan/mt. Before the end of June, some large downstream enterprises will close accounts and take inventory, which will continue to disrupt trading activity for lead ingots. Once July arrives, the lead market will return to normal trading. In some regions, transactions for primary lead at a significant contango (against SMM#Pb) are expected to decrease, or the contango will narrow. On the secondary lead side, constrained by losses, smelters' shipments are limited, and some enterprises already have inventory buildup. If arrivals of imported lead increase to supplement supply, it cannot be ruled out that secondary refined lead may turn to widen the contango.