Cost Support vs. Pre-Holiday Stockpiling to Keep Lead Prices Strong in the Short Term

Futures Market:

Overnight, LME lead opened at $2,243.5/mt. During the Asian session, it briefly touched a high of $2,255/mt before trending downward. In the European session, it continued to decline, reaching a low of $2,210.5/mt. By the night session, the US dollar index weakened, and LME lead rebounded, closing at $2,246/mt, up 0.13%.

Overnight, the most-traded SHFE 2407 lead contract opened at 18,670 yuan/mt, reaching a low of 18,590 yuan/mt. Before the close, it was boosted by LME lead, with shorts reducing positions, pushing it up to a high of 19,030 yuan/mt. It finally closed at 18,910 yuan/mt, up 0.61%.

Spot Fundamentals:
In the Shanghai market, Chihong lead was quoted at 18,790-18,835 yuan/mt, with a premium of 0-20 yuan/mt over the SHFE lead 2406 contract. In the Jiangsu and Zhejiang regions, Jijin, JCC, and Tongguan lead were quoted at 18,790-18,845 yuan/mt, with a premium of 0-30 yuan/mt over the SHFE lead 2406 contract. SHFE lead surged and then relatively retreated, recently consolidating at high levels. Sellers were firm on prices, with some narrowing discounts. Secondary lead smelters were reluctant to sell at low prices, and quotes significantly decreased compared to the previous day. Downstream companies purchased as needed at low prices, with transactions improving in some areas, but warrant transactions remained weak.

Lead Price Forecast
On the macro front, US ADP non-farm payrolls increased by 152,000 in May, the smallest gain since January this year. The US ISM Non-Manufacturing PMI for May recorded 53.8, the highest since August 2023, with the business activity index posting the largest increase in three years. The Caixin China Services PMI for May rose to 54, the highest since August 2023.
In terms of spot fundamentals, raw material supply remains tight, with smelter raw material inventories not ample and procurement quotes more likely to rise than fall, providing strong cost support. Additionally, with several large lead smelters resuming or preparing to resume production, lead ingot supply is expected to continue increasing. Downstream companies are generally cautious, purchasing as needed at low prices. With the Dragon Boat Festival holiday approaching, battery companies' willingness to purchase may improve. Overall, lead prices are expected to maintain a range-bound trend in the short term.