Expectations for production cuts on China’s supply side rise, lead price decline is expected to slow down [SMM Lead Morning Meeting Summary]

Futures:

Overnight, LME lead opened at $1,891.5/mt, fell sharply right after the opening to touch a low of $1,880.5/mt, and although the decline was partially pared back, it mostly consolidated around $1,885/mt during Asian trading hours. Entering the European session, LME lead gradually recovered its earlier losses and approached $1,900/mt, eventually closing at $1,892/mt, up 0.34%.

Overnight, the most-traded SHFE lead 2609 contract opened at 15,635 yuan/mt, after which bears reduced positions successively. SHFE lead extended its consolidating rebound from yesterday afternoon and regained a firm footing above the 15,700 yuan/mt level, finally closing at 15,705 yuan/mt, up 0.51%; open interest stood at 102,000 lots, down 4,924 lots from the previous trading day.

On the macro front:

China's industrial profits above designated size rose 15.1% YoY in June, with electronics industry profits surging 96.9% in H1. From January to June, total profits of industrial enterprises above designated size nationwide reached 3,947.99 billion yuan, up 18.7% YoY. US-Iran negotiations sent mixed signals: Tehran denied holding talks, while Washington said to "leave room for peace," and Saudi Aramco oil and gas facilities were suspected of being attacked by drones. Behind the pause in mutual strikes between the US and Iran: Iran claimed progress in talks with Oman on shipping management in the Strait of Hormuz, while the US military is facing ammunition shortages.

:

In the lead spot market yesterday, the SHFE lead trading center shifted further downward, and suppliers' willingness to sell at low prices diminished. Among them, discounts on EXW primary lead cargoes from smelters narrowed, with mainstream producing regions quoted at discounts of 30-0 yuan/mt against the SMM #1 lead average price. In the secondary lead sector, smelter sentiment for holding back from selling at low prices was strong; some enterprises planned production cuts or shutdowns due to widening losses. Market quotations were sparse, with some secondary refined lead EXW quotations at parity with the SMM #1 lead average price, and a few quoted at premiums of 100 yuan/mt. Downstream enterprises continued to purchase as needed, and a few showed some willingness to restock at low prices, but limited by tight liquidity, the improvement in spot market transactions was modest.

Inventory: As of July 24, LME lead inventory stood at 447,800 mt, down 1,050 mt from the previous trading day. SHFE lead ingot warrant inventory totaled 57,720 mt, flat from the previous trading day. Total social inventory of SMM lead ingots across five major regions reached 68,400 mt, up 4,700 mt from July 20 and up 6,000 mt from July 23.

Lead Price Forecast Today:

Recently, the off-season trend in the lead-acid battery market persisted, with most downstream enterprises cutting production. Moreover, as the month-end approaches, corporate liquidity is tight. Although lead prices fell steadily, downstream enterprises still did not engage in concentrated restocking at low prices. Suppliers' willingness to ship to delivery warehouses for hedging purposes increased, and attention should be paid to the shift of invisible inventory into visible inventory. On the other hand, as lead prices fall steadily, losses at secondary lead enterprises have further intensified, and the willingness to cut production has strengthened among some enterprises; meanwhile, some primary lead enterprises will gradually undergo maintenance, which may ease the pressure of lead ingot inventory buildup to some extent, provide some support for lead prices, and limit its further downside room.

Data source statement: All data other than publicly available information are processed by SMM based on public information, market communications, and SMM's internal database models, for reference only and do not constitute any decision-making advice.