Macro Disruptions Compound Weak Fundamentals, Lead Prices Reverse and Weaken [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $2,038/mt. With repeated setbacks in US-Iran ceasefire progress, non-ferrous metals declined across the board. After touching $2,046/mt for two consecutive days, LME lead began to fluctuate downward overall, with losses widening particularly during the night session, nearly giving back all of the previous day's gains, ultimately closing at $2,020.5/mt, down 0.81%.

Overnight, the most-traded SHFE lead 2607 contract opened at 16,575 yuan/mt. Under pressure from increasing domestic supply, compounded by the drag from LME lead's decline, SHFE lead fell consecutively after the open, dropping below all moving averages to a near three-week low of 16,485 yuan/mt. The decline eased slightly toward the close, with SHFE lead ultimately settling at 16,500 yuan/mt, down 0.87%. Open interest stood at 63,578 lots, an increase of 2,430 lots from the previous trading day.

On the macro front:

US-Iran peace talk progress was volatile: US President Trump stated that negotiations with Iran were going "very well" and were "very close" to signing an agreement, with the naval blockade potentially lasting until September. The US House of Representatives passed a resolution limiting Trump's authority to use military force against Iran. Israel's Prime Minister said there were "tactical differences" with Trump but core objectives remained aligned. Rubio reiterated that US military operations against Iran had ended, while the Israeli military stated there was "no ceasefire to speak of" in Lebanon. Additionally, the US May ISM Services PMI rebounded above expectations, with the prices paid sub-index hitting a 4-year high. US May ADP employment increased by 122,000, a 16-month high. The US Fed Beige Book noted that Middle East conflicts pushed up inflationary pressures, consumer confidence weakened, and employment remained stable.

:

Yesterday in the lead spot market, driven by LME lead's gains, SHFE lead showed strong performance, while spot market circulating cargoes were ample. Some suppliers lowered their quoted discounts to sell, with mainstream producing-region primary lead smelter cargoes self-picked up from production site quoted at premiums of parity to the SMM #1 lead average price on an ex-works basis. Meanwhile, secondary lead smelters showed increased willingness to sell, with discounts widening in some regions, as secondary refined lead was quoted at premiums of -50~0 yuan/mt to the SMM #1 lead average price on an ex-works basis. Downstream enterprises generally adopted a wait-and-see attitude, with some making just-in-time procurement only, and spot market transactions were sluggish.

Inventory: As of June 3, LME lead inventory was 313,675 mt, down 275 mt from the previous trading day. SHFE lead ingot warrant inventory totaled 57,498 mt, an increase of 203 mt from the previous trading day. SMM lead ingot social inventory decreased by 1,600 mt compared to May 28.

Today's lead price forecast:

Recently, the ex-China macro landscape has been complex, expectations for the recovery cycle of maritime shipping have been pushed back, and non-ferrous metals were in negative territory across the board. Meanwhile, LME lead inventory stands at its highest level since 2013, forming a stark contrast with tight spot supply in Southeast Asia. In China, due to periodic supply-demand mismatch, expectations of lead ingot inventory buildup have emerged. Coupled with increasing spot discount transactions, lead prices are expected to weaken in the short term, with attention to subsequent cost support factors from secondary lead.

Data Source Disclaimer: Data other than publicly available information is derived by SMM based on public information, market communication, and SMM's internal database models, and is for reference only and does not constitute decision-making advice.