Lead Market Supply and Demand Both Weak, Beware of Risk of Lead Price Retreat after Rapid Rise before Delivery [SMM Lead Market Weekly Forecast]

         Next week, the market will see the release of important macroeconomic data, including the US June unadjusted CPI annual rate, China’s Q2 GDP annual rate, and the US June PPI annual rate. Additionally, the US Fed will release the Beige Book on economic conditions. It is reported that the US launched a new round of strikes against Iran this week, leading to a sharp drop in shipping traffic through the Strait of Hormuz, but a US official indicated that both sides are still holding “technical negotiations” on the nuclear issue. Mixed macro signals are expected to continue disrupting base metal market trading.

LME lead, affected by ongoing macro disruptions, continued its consolidation pattern. Meanwhile, the decline in LME lead inventories slowed, and LME Cash-3M contango widened further, with the latest quote at -$44.34/mt. Additionally, in Southeast Asia, high-grade lead ingots maintained a high premium, while trading for low-grade material was difficult, and polarization persisted. With the interplay between high inventories and high premiums and no new drivers emerging, LME lead is expected to maintain a range-bound consolidation pattern, trading within $1,885-1,915/mt.

SHFE lead, driven by production cuts at smelters alongside increased downstream cargo pick-up, continued destocking of lead ingot inventories, providing certain support to lead prices this week. However, next week, as the most-traded SHFE lead 2607 contract approaches delivery, some on-site inventory may shift to delivery warehouses, making sustained destocking of lead ingots unlikely. Attention should be paid to the pace of invisible inventory converting to visible inventory and the risk of lead prices retreating after rapid rises. The most-traded SHFE lead contract is expected to trade within 15,900-16,250 yuan/mt next week.

Spot lead price forecast: 15,850-16,050 yuan/mt. On the demand side, lead-acid battery market demand was relatively weak, with downstream enterprises producing based on sales and maintaining limited demand for lead ingots. On the supply side, primary lead smelters had expectations of resuming production after maintenance, while secondary lead smelters saw increasing maintenance. The production divergence is expected to make secondary lead prices outperform primary lead, reducing the likelihood of secondary refined lead trading at spot discounts. In the primary lead market, focus will remain on the reduction in available spot supply due to delivery and its impact on spot discount levels.