Limited Fundamental Support, Focus on Macro, Beware of Lead Price Jumping Initially and Then Pulling Back

Next week, there will be many significant macro events. On one hand, the 12th meeting of the Standing Committee of the 14th National People's Congress of China will be held in Beijing from November 4 to 8; on the other hand, the US will hold the 2024 presidential election and the US Fed will announce its interest rate decision. Key economic data include the US September factory orders month-on-month, US September durable goods orders month-on-month, US November one-year inflation rate expectations preliminary value, and Eurozone September PPI month-on-month.

Regarding LME lead, the overseas market fundamentals are not prominent, and the market's focus is mainly on the US Fed's November interest rate decision and the US election. During this period, the market trades on the expectation of the US interest rate cut in November, the US dollar index fluctuates downward, and most base metals strengthen, with LME lead also rebounding after dipping. Next week, LME lead may fluctuate upward, but caution is needed for the risk of futures market pullback after macro news releases. LME lead is expected to operate in the range of $2,000-2,085/mt.

Regarding domestic SHFE lead, as the northern regions start winter heating, areas such as Henan, Hebei, and Anhui have successively issued air pollution warnings, leading to vehicle restrictions and production cuts or suspensions in lead smelters. The expected supply reduction may support lead prices to fluctuate upward. Currently, social inventory of lead ingots is on the rise, and with the delivery of the SHFE lead 2411 contract in November, inventory transfers by holders will increase the pressure of inventory buildup. The most-traded SHFE lead contract is expected to operate in the range of 16,600-17,050 yuan/mt next week.

Spot price forecast: 16,350-16,700 yuan/mt. On the supply side, primary lead production is relatively stable, while secondary lead production faces many uncertainties due to losses and environmental protection factors. Many lead smelters stand firm on quotes, and the price spread between secondary lead and primary lead is minimal. On the consumption side, entering November, the lead-acid battery market consumption is steadily increasing, and downstream enterprises maintain a restock-as-needed pace. If lead prices fall, it may stimulate downstream bargain hunting.