Lead Prices May Still Be Supported at the Bottom Amid Tight Supply and Rising Demand [SMM Lead Morning Comment Dec 19]

Overnight, LME lead opened at $1,987.5/mt and briefly touched a high of $1,997.5/mt during the Asian session before fluctuating downward. Entering the European session, pressured by the US dollar index's rally, LME lead fell to a low of $1,970/mt, slightly rebounded at the close, and finally settled at $1,983/mt, down 0.1%.

Overnight, the most-traded SHFE lead 2501 contract opened at a low of 17,280 yuan/mt. After shorts reduced positions, it slightly rebounded, fluctuating rangebound around the intraday moving average. It touched a high of 17,435 yuan/mt at the close and finally settled at 17,420 yuan/mt, down 0.91%.

Macro side, the US Fed's December meeting decided on an interest rate cut of 25 basis points with an 11:1 vote, and the statement hinted at a slower pace of rate cuts. The dot plot showed the forecast for next year's rate cuts was adjusted from four times to two. Powell stated that future rate adjustments could be more cautious, depending on further progress in reducing inflation. It may take another one to two years to achieve the inflation target, and rate hikes are unlikely next year. The PBOC and the State Administration of Foreign Exchange announced the optimization of cross-border integrated RMB and foreign currency capital pool pilot policies in 10 provinces and cities, including Shanghai, Beijing, and Jiangsu. The PBOC also held talks with some financial institutions, urging them to monitor their interest rate risks and enhance the stability of bond investments.

Fundamentals, as of 12:00 p.m. yesterday, Anhui province lifted the orange alert for smog weather, and some local smelters resumed production. However, some smelters indicated that it would take half a month to fully restart production after a complete shutdown. In Shandong province, smelters reported that they had not yet received the lifting notice and were still maintaining furnace shutdown. With the approach of New Year's Day and the Chinese New Year holidays, downstream enterprises are expected to stockpile ahead of the holidays. Coupled with the year-end push for production by some large battery producers, lead prices may still find support at the bottom amid tight supply and rising demand.