Macro and Fundamentals Remained Weak, Future Lead Price Trends Depend  on Costs [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,019.5/mt. Dragged by macro weakness and the news of Russia's OZ lead-zinc mine commissioned in advance, LME lead's trading focus further shifted downward, breaking the $2,000/mt mark, hitting a low of $1,988/mt, a new one-month low. By the end of the session, LME lead closed at $1,988/mt, down 1.36%.

Overnight, domestic lead ingot inventory accumulation intensified, and SHFE lead's overall trading focus shifted downward again. The most-traded SHFE lead 2410 contract opened at 17,000 yuan/mt. Initially, strong bearish forces pushed SHFE lead down to 16,895 yuan/mt. Later, as the tug-of-war between bulls and bears intensified, SHFE lead attempted but failed to reclaim the 17,000 yuan/mt mark, finally closing at 16,935 yuan/mt, down 0.94%. Its open interest was 52,754 lots, a decrease of 1,960 lots from the previous trading day.

Macro side, PBOC: There is still some room for RRR cuts, but further declines in deposit and loan interest rates face certain constraints. The US ISM services index expanded moderately for two consecutive months; the US ADP employment for August unexpectedly showed a gain of 99,000, the lowest in three and a half years; initial jobless claims in the US last week were 227,000, the lowest since early July; Challenger job cuts in the US for August were the highest for the month in 15 years, and year-to-date hiring was at a historical low. New evidence of a cooling labour market adds to economic concerns, supporting strong rate cut bets.

Fundamentals side, domestic lead ingot social inventory increased by over 10,000 mt, coupled with Russia's OZ lead-zinc mine commissioned in advance, further expanding the decline in lead prices. We also need to pay attention to the supply of scrap and the extent of losses in secondary lead smelting, including changes in lead ingot shipments from smelters and in production intentions of smelters.