Delivery Approaching with Visible Inventory Accumulation May Weigh on Lead Prices [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,975.5/mt. The US dollar index hit a new high, suppressing base metals. LME lead showed a fluctuating downward trend throughout the day, hitting a low of $1,941/mt and giving back most of the previous day's gains. It finally closed at $1,948/mt, down 1.67%.

Overnight, the most-traded SHFE lead 2502 contract opened at 16,580 yuan/mt. As lead ingot inventory increased as expected near delivery, SHFE lead quickly declined after opening and then fluctuated between 16,450-16,500 yuan/mt for an extended period, eventually closing at 16,490 yuan/mt, down 0.72%. Its open interest reached 37,594 lots, an increase of 614 lots from the previous trading day.

》Click to view SMM lead spot historical quotations

Macro: PBOC Governor Gongsheng Pan stated that the central bank will resolutely prevent exchange rate overshooting risks, strengthen counter-cyclical adjustments, and local debt risks are trending towards convergence. In 2024, automobile production and sales are expected to remain stable and continue growing, reaching 31.282 million and 31.436 million units, respectively, up 3.7% and 4.5% YoY, maintaining the global lead for 16 consecutive years.

Spot Market Fundamentals :

Yesterday in the lead spot market, SHFE lead showed a trend of moving downwards after a higher opening. Suppliers had limited cargoes, and with delivery approaching, market quotations were scarce. Some smelters lowered premiums for cargoes self-picked up from production sites. Secondary refined lead also saw narrower premiums. Downstream enterprises made scattered purchases, with some having completed pre-holiday restocking and others buying on dips as needed. For primary lead, smelters had limited inventory, and spot quotations were scarce, with some ex-factory prices quoted at premiums of 0-200 yuan/mt against the SMM 1# lead average price. In mainstream trade markets such as Jiangsu, Zhejiang, and Shanghai, domestic lead mainstream quotations were at premiums of 0-80 yuan/mt against the SHFE 2502 contract. For secondary lead, smelters gradually resumed production, increasing the availability of spot cargoes in the market. Secondary refined lead was quoted at premiums of 0-100 yuan/mt ex-factory against the SMM 1# lead average price.

Inventory: As of January 13, LME lead inventory decreased by 2,550 mt to 223,175 mt. As of January 13, the total social inventory of lead ingots in five major regions tracked by SMM stood at 47,600 mt, down 600 mt from January 6 but up 1,700 mt from January 9.

》Click to view the SMM metal industry chain database

Lead Price Forecast Today:

This week, the SHFE lead 2501 contract is set to enter delivery. The transfer of delivery brands to warehouses has brought some inventory increases. Compared to last month's delivery, the lead ingot delivery volume this time has significantly decreased from December. The main reasons are as follows: Since late December, SHFE lead prices have dropped sharply, and the spot market supply was relatively tight at that time, with spot cargoes generally sold at premiums. Additionally, with the Chinese New Year at the end of January, considering logistics suspension and downstream holidays, suppliers mostly sold January cargoes in late December and accelerated their sales pace after entering January. Therefore, this round of lead ingot delivery volume is relatively small, and the inventory buildup in social warehouses due to delivery is limited. Furthermore, it is worth noting that with the start of the Spring Festival travel rush, some downstream enterprises are about to go on holiday. As consumption weakens, the risk of lead ingot inventory buildup increases. After logistics operations are suspended, lead ingot inventory will primarily be reflected in smelters' in-plant inventory.