[Secondary Lead Market Update] Lead prices weakened this week. Secondary crude lead sellers held back from selling, while downstream procurement was sluggish and trading was thin. Imported crude lead supply was limited. The supply-demand situation for secondary crude lead is unlikely to change next week, making it essential to focus on the profitability of importing crude lead.

SMM July 3 News: The most-traded SHFE lead 2608 contract opened at 15,850 yuan/mt in intraday trading. In the morning session, it surged in a choppy manner, hitting an intraday high of 15,965 yuan/mt, before turning downward and weakening. In the afternoon, it continued to consolidate at lows, recovered slightly in late trading, and traded in a choppy manner. At the close, it settled at 15,885 yuan/mt, ending a four-day losing streak and recording a small bullish candlestick, gaining 120 yuan, or 0.76%. In the short term, lead prices were pressured by three bearish factors: weak seasonal demand in the battery off-season, inventory buildup from concentrated production resumptions at primary lead enterprises, and expectations for US Fed interest rate hikes. However, tight supply of scrap batteries pushed up smelting costs, and widespread production cuts due to losses at secondary lead smelters, combined with a global shortage of refined lead, provided bottom support for prices. In the short term, SHFE lead remains in the doldrums, with limited downside room. In the future, the focus should be on tracking downstream procurement, production resumptions at secondary lead smelters, lead ingot imports, and macro inventory changes outside China. Data Source Statement: Other data beyond public information is based on public data, market communication, and SMM's internal database models, processed by SMM, and is for reference only, not constituting any decision-making advice.

Next week, the main macroeconomic data to be released include China's June CPI annual rate and the US June ISM non-manufacturing PMI. This week, US non-farm payrolls data came in far below the previous value and expectations, cooling market expectations for a US Fed interest rate hike. The US dollar index may return to a weak range of fluctuation. Although the prospects for US-Iran peace talks remain unclear, the gradual recovery of shipping and maritime transport and the decline in crude oil prices indicate that supply chain markets are recovering. In addition, it should be noted that the US Fed will release the minutes of its monetary policy meeting next week. For LME lead, high lead ingot inventory outside China is the biggest bearish factor in current market trading, especially as LME lead prices fell, the LME lead Cash-3M contango did not narrow but widened, with the latest quote at -$37.79/mt. Fundamental news was mediocre, providing limited support for prices. In the near term, we need to pay more attention to the US dollar index trend and the new developments from next week’s US Fed meeting, and their impact on the metals market. LME lead is expected to trade in the range of $1,865-1,915/mt next week. For SHFE lead, this week, amid a carnival for bears, SHFE lead fell to a more than two-year low, causing lead smelters’ losses to widen and forcing secondary lead enterprises to cut or suspend production again. Bears then began to exit, and lead prices stopped falling and rebounded. Going forward, we need to monitor downstream enterprises’ purchasing trends. If lead ingot destocking materializes, lead prices may continue to rebound; otherwise, we should remain vigilant about bearish funds that have not exited. Next week, the most-traded SHFE lead contract is expected to trade in the range of 15,800-16,100 yuan/mt. Spot Price Forecast: 15,750-16,000 yuan/mt. Consumption side, the off-season trend in July remains unchanged. However, after large enterprises complete their semi-annual inventory checks and account closing, they will resume regular purchasing, which may bring some purchasing expectations. Supply side, primary lead enterprises are about to resume production after maintenance, turning supply expectations upward. Meanwhile, secondary lead enterprises are in a state of production cuts, leading to regional supply constraints. If lead prices continue to rebound next week, we need to watch for the possibility of secondary lead production resuming as losses are repaired. Spot lead is expected to remain in contango trading.

SMM, Jul 3 – This week, secondary refined lead fell by 200 yuan/mt alongside the SMM #1 lead ingot price. EXW prices for secondary refined lead ranged from parity to a premium of 25 yuan/mt, with delivered cargoes at a highest premium of 100 yuan/mt. Smelters, facing losses, held prices firm and held back from selling, while downstream battery plants made just-in-time procurement during the off-season. The market saw prices but few deals, with sluggish transactions, and significant improvement in trading activity is unlikely in the short term. As of Jul 3, large-scale secondary lead enterprises in China incurred a loss of 548 yuan/mt, while losses at small and medium-sized secondary smelters widened to 742 yuan/mt. Finished secondary lead prices continued to trend downwards, and scrap battery raw material costs fluctuated at highs. This week, smelters’ losses widened further WoW. Currently, secondary lead smelters’ overall operating rate remains at a low level, and enterprises are awaiting a recovery signal in end-use consumption in July. It is expected that overall secondary lead supply volume next month will be basically flat with this month, and the premium range for secondary refined lead will remain stable in the short term.

SMM, July 3: Scrap battery prices weakened this week, as lead ingot prices fell by a cumulative 200 yuan/mt in June, dragging down the average scrap battery price across regions. Secondary lead smelters remained loss-making and adopted a cautious approach to material purchasing. Early in the week, the decline in lead prices prompted recyclers to sell intensively, increasing arrivals in east and north China; later in the week, supply tightened and smelters did not raise purchase prices after lead prices rebounded, cooling recyclers’ willingness to sell. The terminal battery off-season kept operating rates low, while hazardous waste rectifications squeezed non-mainstream supply, leaving the short-term market mixed. Supply tightening and expectations of smelter production resumptions in July lent support, while smelting losses capped room for price hikes. Scrap battery prices are expected to remain stable in a narrow range, with a need to track lead prices and smelter resumption progress.

[Secondary Lead Production Dynamics] During the week, lead prices broke below 16,000; secondary lead smelters in Anhui suffered losses and halted production, leading to lower operating rates; smelters in Henan and Jiangsu restocked raw materials and increased production; smelters in Inner Mongolia will resume production next week; and overall, operating rates are expected to rebound slightly next week, with raw material and lead prices as key indicators to watch.

In the spot market this week (6.29-7.3), the SMM #1 lead price drifted lower, declining for three consecutive days and cumulatively falling 325 yuan before staging a slight rebound on Friday to recover part of the losses. Amid month-end and mid-year book-closing and inventory checks, downstream battery producers held a strong wait-and-see sentiment, only purchasing small volumes for immediate needs, leaving overall spot order trading sluggish. By region, in Henan, smelters focused on deliveries under long-term contracts, and traders' discount range against the SHFE lead 2608 contract narrowed initially and then widened, with the full-week discount at 130-50 yuan and only sporadic transactions for low-priced cargoes; in Hunan, smelter spot order discounts gradually narrowed from 50-0 yuan to parity, with moderate transactions for low-priced cargoes; supplies in Jiangxi and Anhui remained tight throughout, with offers consistently at a premium of 100 yuan; Yunnan smelters cut prices to clear inventory, with discounts widening to 200-150 yuan during the week.

SMM July 3: Lead prices weakened this week, and secondary crude lead sellers generally held back from selling. Downstream alloy and refined lead smelters were weighed down by sluggish end-use demand, leading to weak purchase willingness and overall thin spot trading. The profit window for imported crude lead was narrow at present, limiting incoming shipments. Only some low-cost overseas materials containing antimony and tin arrived at ports, with EXW prices close to parity with the SMM #1 lead average price. Next week, the supply-demand pattern for secondary crude lead is not expected to change significantly. Going forward, the focus will be on tracking profit and loss changes for imported crude lead.

It is learned that as of July 2, the in-factory inventory of major primary lead delivery brands stood at 26,000 mt, up 3,300 mt WoW. This week, primary lead smelters experienced both maintenance and production restarts, with the reduction slightly outweighing the increase, resulting in a relative contraction in weekly supply. Meanwhile, lead prices fell sharply to a more than two-year low. Smelters held back from selling at low prices and even suspended shipments at one point. At the same time, downstream enterprises were highly risk-averse; although they had the intention to stockpile on dips, their purchases were relatively limited, leading to an accumulation of in-factory inventory at primary lead smelters.

Entering July, end-use consumption in the e-bike and automotive battery markets remained weak. Notably, after multiple battery enterprises ran sales promotions and price cuts in June, dealer battery inventories were generally high and purchasing power declined. Some enterprises indicated that orders weakened further in early July. In the battery wholesale market, some dealers plan to stop promotions and have started to announce price increase plans—for instance, the price of e-bike lead-acid batteries is expected to rise by 20-30 yuan per unit. In addition, lead prices fell this week, prompting producers to seize the opportunity to stockpile at low prices. However, due to the off-season, actual purchases were relatively cautious and mostly dependent on order situations, leading to improved trading activity in the spot market.