Suppliers sell at market, lead ingot transactions remain weak [SMM Lead Morning Meeting Summary]

Futures:

Overnight, the LME lead 3M contract drifted lower throughout the session on August 19. It opened at around $1,888/mt, moved sideways in a narrow $1,880-1,890/mt range early in the session, then gradually declined, hitting an intraday low of $1,871.0/mt. It saw a slight rebound near the close and settled at $1,886.0/mt, down $2.0/mt or 0.11% from the prior trading day. The trading range for the day was $1,871.0-1,891.5/mt, with a range of $20.5/mt. Trading volume was 6,780 lots.

Overnight, the SHFE lead 2610 contract fell initially but then rose in the night session. After opening, it quickly dipped to 15,870 yuan/mt, then rebounded in choppy trade, touching a session high of 15,975 yuan/mt. It closed around 15,970 yuan/mt, up 30 yuan/mt or 0.19% from the prior session’s settlement price. Night session volume was 23,831 lots, and open interest rose 1,506 lots to 81,480 lots from the prior day.

Macro:

On the international front, Middle East tensions escalated further, with Trump announcing the harshest ever economic sanctions on Iran, calling them “unprecedented economic war and isolation.” Fed minutes showed growing hawkishness, with most officials still expecting inflation to gradually decline but acknowledging persistent upside risks. US federal government debt topped $40 trillion. Driven by a sharp drop in the US dollar index and safe-haven demand, spot gold rose above $4,500 to a new high since June, while silver surged over 5%. The three major US stock indices closed slightly higher, and the Nasdaq Golden Dragon China Index rose 1.5%. Trump suspended the 50% tariff on Canada for three days, and the US-Canada trade deal plans to halve steel and aluminum tariffs to 25%.

On the domestic front, the “15th Five-Year Plan” for Universal Medical Security was released. The NDRC held a meeting on the “Six Networks” major project coordination mechanism to improve infrastructure collaboration. The China Gold Association issued a stern statement, saying that China’s gold industry chain is complete and has sufficient resilience to withstand external risks.

Spot fundamentals:

SHFE lead continued to consolidate at highs. SMM 1# lead price rose 25 yuan/mt. Suppliers sold as prices moved, with supply of circulating cargoes in Jiangsu, Zhejiang, and Shanghai increasing slightly. Quotations from mainstream producing areas were at discounts of 20 to premiums of 50 yuan/mt to the SMM 1# lead average price ex-works. The north-south market divergence was notable. Smelters in the north saw falling inventory and firm quotations, with spot discounts narrowing and turning into premiums. Downstream purchases in south China were scattered and lacking persistence, with discount-based deals dominating and thin trading. Secondary lead smelters sold as prices moved, but supply of circulating cargoes was limited. Secondary refined lead quotations were at discounts of 100 to 0 yuan/mt to the SMM 1# lead average price ex-works. Downstream enterprises showed moderate enquiry enthusiasm, making just-in-time procurement only, and spot market trading was weak.

Inventory: As of August 18, LME lead inventory stood at 418,575 mt, an increase of 9,585 mt from the previous trading day; SHFE lead ingot warrant inventory totaled 65,490 mt, down 74 mt from the previous trading day.

Lead price forecast for today:

Yesterday, LME lead inventory surged by 9,585 mt to 418,600 mt, with high overseas visible inventory weighing on LME; in China's spot market, suppliers of primary lead and secondary lead sold at prevailing market prices, but with a clear north-south divergence in trading, and supply of secondary lead in the market was limited; recently, downstream lead-acid battery consumption has improved, but lead ingot procurement demand remained mainly just-in-time. Overall, lead prices are expected to continue consolidating at highs in the near term.