Macro Disturbances Temporarily Eased, Lead Prices Next Week Expected to Focus on Fundamentals [SMM Weekly Lead Market Forecast]

SMM, February 7: Next week, there will be few significant macroeconomic data releases, mainly including the US January unadjusted CPI year-on-year, US January PPI year-on-year, and US January retail sales month-on-month. During the Chinese New Year, mutual tariff increases between China and the US had a significant impact on the commodity market, involving products such as energy and automobiles, and raised concerns about economic instability. Safe-haven assets like gold hit historical highs, and short-term macro factors will continue to influence base metals.

Regarding LME lead, post-Chinese New Year, LME lead inventory showed a destocking trend, in contrast to the significant inventory buildup during the same period last year. The destocking factor may continue to support lead prices. Meanwhile, the LME cash-3M contango narrowed compared to pre-holiday levels, closing at -$28.57/mt on February 6. Both factors are favorable for lead prices. With frequent policy changes in overseas markets and rising economic uncertainty, we must remain vigilant about policy risks. LME lead is expected to trade between $1,945-2,045/mt.

For SHFE lead, due to varying holiday schedules among upstream and downstream enterprises during the Chinese New Year, domestic lead ingot inventory increased as expected after the holiday, which does not support a strong lead price. Against this backdrop, the spread between futures and spot prices widened, with the spread in major production areas once expanding to 200 yuan/mt, increasing suppliers' willingness to transfer to delivery warehouses. Lead ingots shifted from in-plant inventory to social warehouses, leading to a significant visible inventory buildup. Next week, as downstream enterprises resume production, there may be some restocking demand, and attention should be paid to the pace of lead ingot destocking. The most-traded SHFE lead contract is expected to trade between 16,700-17,350 yuan/mt next week.

Spot price forecast: 16,750-17,050 yuan/mt. Next week, on the demand side, lead-acid battery enterprises will largely resume production, and after the first post-holiday week of cautious purchasing by downstream enterprises, there may be some restocking demand. On the supply side, primary lead smelters are expected to see relatively stable production, while some enterprises that underwent maintenance during the Chinese New Year will resume operations. The most significant supply increase is anticipated in the secondary lead sector, as smelters resume production. After the Lantern Festival, lead ingot supply is expected to increase significantly, and spot premiums may decline further, with the possibility of discount transactions.