Futures:
Overnight, the LME lead 3M contract opened at $1,875.0/mt on September 16, drifting lower during Asian and European trading hours. After the Fed's rate decision landed in the early morning, it quickly rallied and shot up to $1,890.0/mt, then pulled back slightly in late trading to close at $1,882.0/mt, up $6.5/mt or 0.35% from the previous trading day's closing price. The full-day trading range was $1,871.5-1,891.0/mt, with volume of 5,993 lots, a slight increase, and open interest of 178,216 lots, up 3,735 lots. The daily candlestick closed as a small bullish candlestick.
Overnight, the SHFE lead 2610 contract opened at 15,915 yuan/mt in the night session, quickly dipped to 15,845 yuan/mt after the open, then consolidated higher, reaching an intraday high of 15,930 yuan/mt. It then consolidated in the 15,860-15,900 yuan/mt range, and after the rate decision landed in the early morning, it remained firm, ultimately closing at 15,900 yuan/mt, up 30 yuan/mt or 0.19% from the previous trading day's closing price. Night session volume was 20,137 lots, a notable contraction, with open interest of 58,038 lots, down 4,242 lots. The SHFE lead 2609 contract has its final delivery day today (September 17), and the most-traded contract rollover is accelerating, with funds migrating from the 2610 contract to the 2611 contract.
On the macro front:
Overseas, the Fed's September rate decision landed in the early morning today, with a unanimous vote to hike rates by 25 basis points, the first hike since July 2023. The latest dot plot shifted significantly higher, with the median year-end rate at 4.1%, implying one more possible hike this year. Fed Chairman Warsh said inflation remains elevated, that this move removes some accommodation, and declined to provide forward guidance, with an overall hawkish tone. US August retail sales rose 1.2% MoM, the highest since March, and economic resilience reinforced rate hike expectations. The US dollar index surged 0.7% to break above the 100 level (at 100.1, the largest single-day gain since mid-June), while the 10-year Treasury yield rebounded in a deep V-shape and held above 5%. A strong dollar and high rates weighed on nonferrous metals valuations, but with the rate hike now landed and largely priced in, LME lead and SHFE lead rose rather than fell in the early morning. On geopolitics, Saudi Arabia is seeking to restore half the capacity of the attacked oil pipeline within days, but the Middle East situation remains volatile, with the Houthis announcing military operations inside Saudi territory.
In China, Wang Yi held talks with visiting Iranian Foreign Minister Araghchi. On the industrial front, State Grid Corporation of China released measures to optimize the electricity business environment and empower high-quality development. In financial markets, A-shares consolidated and rebounded yesterday, with the Shanghai Composite up 0.71%, the Shenzhen Component up 1.26%, the ChiNext up 1.96%, and the STAR 50 surging 4.14%. Combined turnover on the two exchanges reached 1.84 trillion yuan, an expansion of over 220 billion yuan, with more than 4,100 stocks rising and market risk appetite recovering. The Hang Seng Index edged up 0.19%, while lithium battery and oil stocks weakened. Regarding rumors that "a related automaker has chosen another power battery supplier" causing consecutive share price declines, CATL will respond in the coming days.
Spot fundamentals:
Yesterday, the SMM #1 lead price was flat from the previous trading day. SHFE lead rebounded after testing lows, and suppliers raised their premium quotations from yesterday, especially for primary lead cargoes self-picked up from production site, where premiums rose more sharply. Mainstream production area quotations were at premiums of 50-150 yuan/mt against the SMM #1 lead average price ex-works. In secondary lead, smelters held back from selling at low prices, and some secondary refined lead from mainstream production areas was quoted at premiums of 0-100 yuan/mt against the SMM #1 lead average price ex-works. Available spot lead supply in the market tightened significantly, with some lead smelters selling out of inventory and most traders having no current-month cargoes available for sale, starting to presell next-month cargoes. Downstream enterprises, after two consecutive days of procurement, showed slightly cooling stockpiling enthusiasm, while some just-in-time procurement continued.
Inventory: As of September 16, LME lead inventory stood at 378,350 mt, down 1,500 mt from the previous trading day; total SHFE lead ingot warrant inventory was 59,719 mt, down 377 mt from the previous trading day.
Lead price forecast for today:
In the early morning, the US Fed delivered a 25 bp rate hike. As bearish factors had been partly priced in earlier, LME lead and SHFE lead rose instead of falling, showing a short-term oversold rebound after the negative news was exhausted. On the spot side, domestic circulating supply remained tight, some smelters sold out of inventory, and suppliers and smelters generally held prices firm with widening premiums, providing support below lead prices. However, downstream procurement enthusiasm cooled after two consecutive days of stockpiling, with only just-in-time buying following, limiting willingness to chase higher prices. Combined with continued LME lead inventory drawdowns and a slight decline in SHFE warrants, spot lead prices are expected to stabilize slightly and consolidate with a firmer bias along with futures today. Rebound room remains constrained by the 16,000 yuan/mt level and spot transaction follow-through. Focus on US dollar movements, the sustainability of the LME lead rebound, and whether SHFE lead can reclaim the 16,000 yuan/mt level.
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