US Dollar Pressure Ahead While Fundamentals Remain Resilient; Lead Prices Expected to Consolidate at Highs [SMM Lead Market Weekly Forecast]

         The key event next week will be the US Fed's September FOMC meeting. With the US inflation outlook deteriorating again, the market rapidly increased bets on a Fed rate hike next week. According to the CME FedWatch Tool, the probability of a 25 bp rate hike next week surged to over 71.3% from about 61% the previous day. On the macro data front, China's August total retail sales YoY, China's August industrial value-added YoY, and US August retail sales MoM will be released.

For LME lead, although LME lead inventory continued its downtrend, the boost to prices was extremely limited. Meanwhile, LME lead Cash-3M remained in backwardation, last reported at -$38/mt. On the fundamentals side, short-term overseas consumption and the supply gap for high-grade lead ingot remained in a stalemate, while new lead-zinc mine projects in Central Asia over the long term have had limited impact on lead prices so far. Next week, focus should be on the US Fed's FOMC meeting and the direction of the US dollar index on nonferrous metals. LME lead is expected to trade at $1,880-1,915/mt.

For SHFE lead, the front-month SHFE lead contract will enter delivery next week. However, delivery brand enterprises are currently undergoing concentrated maintenance, leaving limited deliverable volumes. A large volume of shipments to delivery warehouses is unlikely, and with reduced volumes, the spread between futures and spot prices for lead is gradually narrowing. In addition, secondary lead enterprises saw unexpected production cuts, while imported lead remains a looming threat. Lead prices are expected to continue to consolidate at highs next week. If import risks rise, the price center may shift slightly lower, with the most-traded SHFE lead contract trading at 15,900-16,250 yuan/mt.

Spot lead price forecast: 15,850-16,100 yuan/mt. On lead consumption, lead-acid battery market consumption is moderate, with downstream enterprises purchasing as needed. With the two holidays approaching, attention should be paid to the realization of downstream enterprises' customary pre-holiday stockpiling. On the supply side, the impact of maintenance at primary lead enterprises is intensifying, production resumptions at secondary lead enterprises fell short of expectations, and imported lead has become the largest supply variable. Before large volumes of imported lead arrive, domestic spot lead prices are expected to show strong resilience against declines, with some regions continuing to trade at a small premium (SMM #1 lead average price).