Inventory Continues to Decline While Raw Material Supply shortages Ease; Short-term Lead Prices May Fluctuate Weakly

Futures Market:

Overnight, LME lead opened at $2,329/mt and continued its recent upward trend, reaching a high of $2,359/mt, the highest since April 26, 2022. However, after the release of the US Fed meeting minutes, the US dollar index jumped to a one-week high, causing base metals to plummet. LME lead also fell sharply to $2,308/mt, eventually closing at $2,312/mt, down 0.73%.

Overnight, SHFE lead warrant inventory decreased by over a thousand tons. The most-traded SHFE lead contract opened at 18,685 yuan/mt, but the tight supply of scrap eased, causing SHFE lead to move downwards after a higher opening, reaching a low of 18,455 yuan/mt. SHFE lead closed at 18,520 yuan/mt, down 0.19%. The open interest increased by 1,132 lots compared to the previous trading day to 80,756 lots.

Spot Market Fundamentals:

Yesterday in the lead spot market, SHFE lead continued its downward trend. Sellers maintained small premiums, but actual transactions were quiet. Downstream enterprises increased their inquiries, leading to improved activity. In terms of primary lead, inventory at smelters was low, with quotations maintaining a premium of 0-150 yuan/mt over the average SMM 1# lead price ex-factory. In the mainstream trade markets of Jiangsu, Zhejiang, and Shanghai, domestic lead was quoted with a premium of 0-50 yuan/mt over the SHFE 2406 lead contract. For secondary lead, the decline in lead prices forced traders to sell, significantly increasing the arrivals of scrap at smelters. The secondary refined lead was quoted with a discount of 150-0 yuan/mt over the SMM 1# lead average price ex-factory.

Lead Price Forecast for Today:

Macro aspects: US Fed meeting minutes suggest that it may take longer to cut interest rates. The "new Fed news agency" reported that due to poor Q1 inflation data, Fed officials expect rate cuts to take longer, with some open to rate hikes if inflation accelerates. However, April inflation data reassured that no rate hikes are needed.

Fundamentals: Recently, domestic and overseas lead ingot inventories have continued to decline. Additionally, some primary and secondary lead smelting enterprises are undergoing maintenance, limiting ingot supply. Since May, lead import losses have narrowed, opening the window for lead concentrate imports and easing the tight domestic raw material supply. Meanwhile, the recent decline in lead prices has forced scrap battery traders to shift from hoarding to selling due to fear of further price drops, increasing the circulation of scrap batteries in the market. The arrivals of scrap at some smelters have significantly increased.