Chinese market focus shifts to production of secondary lead enterprises and downstream procurement trends [SMM Lead Morning Meeting Summary]

Futures:

Last Friday, LME lead opened at $1,869.5/mt and moved sideways during the Asian session. Entering the European session, it dipped first before rebounding, hitting a low of $1,863.5/mt, then climbed to a high of $1,890.5/mt near the close as bears cut positions, finally settling at $1,887/mt, up 0.96%.

Last Friday evening, the most-traded SHFE lead 2609 contract opened at 15,875 yuan/mt, briefly touching a low of 15,855 yuan/mt in early trading, then rebounded to a high of 15,980 yuan/mt as bears reduced positions, finally closing at 15,945 yuan/mt, up 0.44%.

On the macro front:

US media reports: US-Iran conflict intensifies, the Pentagon is rushing additional F-16 and F-35 fighter jets to the Middle East. The Eurozone's May current account surplus expanded, as primary income growth offset a narrowing trade surplus. The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) stated that central state-owned enterprises must continue to achieve breakthroughs in original technologies such as foundational algorithms, physical AI, intelligent computing chips and quantum communication. The National Development and Reform Commission (NDRC) released an action plan for AI cooperation and development. The Ministry of Finance adjusted some battery consumption tax policies, gradually resuming collection of consumption tax on certain new energy batteries.

Spot fundamentals:

SHFE lead consolidated on a strong note. Suppliers showed moderate selling enthusiasm, but circulating cargoes in the Jiangsu, Zhejiang and Shanghai markets were limited, with few quotes available. Meanwhile, primary lead smelters sold EXW cargoes following the market trend, with quotes at wider discounts in some regions; mainstream producing areas quoted at discounts of 50-0 yuan/mt against the SMM #1 lead average price for ex-works sales, with a few deals done at even larger discounts. In secondary lead, smelters offered more quotes, with secondary refined lead quoted at discounts of 50-0 yuan/mt against the SMM #1 lead average price ex-works. Downstream enterprises mostly shifted to long-term contract procurement or paused to observe the market, muting the trading atmosphere in the spot order market.

Inventory: On July 17, LME lead inventory decreased by 1,950 mt to 452,075 mt. As of July 16, total social inventory of SMM lead ingots across five regions decreased by about 500 mt WoW from July 13.

Lead price forecast for today:

Due to delivery factors and downstream procurement, visible lead ingot inventory rose first and then fell last week. With the bearish overseas inventory buildup factor now priced in, the Chinese market's focus shifted to the production of secondary lead enterprises and downstream purchasing trends. If lead ingot inventory continues to destock this week, lead prices are expected to return to and consolidate above the 16,000 yuan/mt level.