Lead Ingot Inventory Buildup Before Delivery, Coexisting Supply-Side Increases and Decreases Limit Lead Price Rise [SMM Lead Morning Meeting Summary]

Futures:

Overnight, LME lead opened at $1,907/mt. It traded sluggishly in Asian trading hours, mostly moving sideways in the $1,905-1,910/mt range. After entering European trading hours, losses in LME lead widened. Particularly during the night session, its trading center kept moving lower. After falling to near the middle Bollinger Band, it found support, and eventually closed at $1,890/mt, down 0.6%.

Overnight, the most-traded SHFE lead 2609 contract opened at 15,890 yuan/mt. Affected by lead ingot inventory buildup, SHFE lead drifted lower after opening, breaking below the 5-day and then the 40-day moving averages and falling below 15,850 yuan/mt. It eventually closed at 15,835 yuan/mt, down 0.81%, with open interest at 41,327 lots, down 196 lots from the previous trading day. Recently, open interest in the SHFE lead 2609 contract continued to shift to the SHFE lead 2610 contract. The SHFE lead 2610 contract currently has open interest of 73,855 lots. Watch for subsequent rollover of the most-traded contract.

On the macro front:

US July PPI YoY growth narrowed to 4.7%, with lower energy costs as the main driver, and markets no longer fully priced in US Fed rate hikes this year. Signs of weak demand reemerged. The awarded yield on the 30-year Treasury auction hit the highest level since 2001. US Fed officials showed division: Barkin supported holding rates steady, while Hammack insisted on rate hikes.

:

Yesterday, in the lead spot market, SHFE lead continued to strengthen. Suppliers continued to hold prices firm when selling, and as delivery approached, market offers were limited. In addition, the north-south divergence in EXW shipments from primary lead smelters widened. Mainstream producing areas quoted at parity with the SMM #1 lead average price ex-works, with some at discounts of 50-30 yuan/mt. For secondary lead, smelters sold at prevailing market prices, and circulating market supply increased. Secondary refined lead was quoted at discounts of 100-25 yuan/mt against the SMM #1 lead average price ex-works. Most enterprises mainly purchased under long-term contracts, with some making just-in-time procurement of spot cargoes. Overall market trading activity was moderate.

Inventory: As of Aug 13, LME lead inventory stood at 414,375 mt, down 2,700 mt from the previous trading day. Total SHFE lead ingot warrant inventory was 65,691 mt, up 4,463 mt from the previous trading day. SMM lead ingot social inventory across five regions totaled 75,200 mt, up 4,700 mt from Aug 6 and up 2,400 mt from Aug 10.

Today's Lead Price Forecast:

Recently, as delivery approached, suppliers accelerated moving lead ingots into delivery warehouses, driving lead ingot social inventory to build up as expected and putting some pressure on lead prices. Meanwhile, lead prices continued to strengthen; downstream enterprises were wary of high prices and cautious in purchasing, and their buying interest declined, further driving an increase in social inventory of lead ingots. In mid-to-late August, maintenance increased at primary lead smelters, creating expectations of supply-side tightening; at the same time, as lead prices rebounded, losses at secondary lead enterprises gradually narrowed, and some enterprises showed stronger intentions to resume production. Overall, supply-side tightening coexisted with expectations of secondary lead production resumption, providing limited support to lead prices.

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