After Delivery, Downstream Concentrated Pick-up Leads to Four-Year Low in Lead Ingot Social Inventory [SMM Survey]

According to an SMM survey, as of August 22, the total social inventory of lead in five regions surveyed by SMM was 17,600 mt, a decrease of 39,600 mt compared to August 15 and a decrease of 47,200 mt compared to August 19.

The survey indicated that after the delivery of the SHFE lead 2408 contract, the recently delivered lead re-entered the market, and large downstream enterprises made concentrated pick-up, causing a significant drop in social inventory and hitting a new low since June 5, 2020. In contrast, the spot trading market did not experience a tight supply situation due to the sharp decline in visible inventory in delivery warehouses. The supply from primary lead and secondary lead smelters remained adequate. As of August 22, the ex-factory prices for primary lead spot orders were quoted at a discount of 200-100 yuan/mt against the SMM 1# lead average price, and those of secondary refined lead were quoted at a discount of 300-100 yuan/mt against the SMM 1# lead average price. Additionally, due to the weak lead price trend, the SHFE/LME price ratio narrowed, turning lead imports from profit to loss. Imported lead holders actively offloaded their goods, leading to chaotic market quotations, with discounts ranging from 400-100 yuan/mt against the SHFE lead 2409 contract. Recently, the reduction in production by primary and secondary lead smelters has increased, leading to a temporary tightening of supply, while lead consumption has been lower than expected. It is expected that the decline in social inventory of lead will slow down in the future.