Macro Policy Expectations Dominate, Lead Prices Fluctuate Upward [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $2,009/mt and fluctuated upward throughout the day, with its overall center moving higher. Particularly during the European session, the decline in LME lead inventory expanded, coupled with the US dollar index dropping to a four-month low, which strengthened base metals across the board. LME lead reached a three-month high of $2,035/mt and eventually closed at $2,030/mt, up by 0.87%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,350 yuan/mt. With an inventory buildup in SHFE lead warehouse warrants and the commissioning of new capacity on the domestic supply side, SHFE lead initially reversed its daytime strength. Later, driven by the rise in LME lead, SHFE lead strengthened again but failed to break through the daytime high. It finally closed at 17,410 yuan/mt, up by 0.49%, with open interest at 49,996 lots, a decrease of 675 lots compared to the previous trading day.

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Macro Perspective: China's Government Work Report: The 2025 GDP growth target is around 5%, CPI growth is around 2%, and the deficit ratio is around 4%, with greater efforts to promote the healthy development of the real estate and stock markets. Key points from Trump's Congressional speech: tariffs will continue, seeking to repeal the "CHIPS Act," and the US-Ukraine mineral agreement is expected to be signed soon. The US granted a one-month tariff exemption for Mexican and Canadian cars imported under the USMCA; however, Canada is not on board, with senior officials stating that retaliatory tariffs will not end unless the US fully removes tariffs on Canada.

Spot Market Fundamentals :

Yesterday in the lead spot market, domestic policy-driven positive sentiment fermented, and SHFE lead fluctuated upward. Suppliers were active in selling, with some standing firm on quotes while selling. Discounts narrowed slightly compared to the previous day, and ex-factory quotes for primary lead cargoes also saw narrower discounts. Secondary refined lead was quoted at discounts of 75-0 yuan/mt against the SMM 1# lead average price on an ex-factory basis. Downstream enterprises remained cautious, with increased inquiries, and some focused on long-term contract purchases, while the spot order market remained relatively weak. In major production areas, spot orders for primary lead were quoted at discounts of 20 yuan/mt to premiums of 150 yuan/mt against the SMM 1# lead average price on an ex-factory basis. In the trade market, quotations in Jiangsu, Zhejiang, and Shanghai were at discounts of 40-0 yuan/mt against the SHFE 2504 contract.

Inventory: As of March 5, LME lead inventory decreased by 3,075 mt to 20,840 mt. As of March 3, the total social inventory of SMM lead ingots in five regions reached 70,200 mt, an increase of 10,300 mt compared to February 24 and an increase of 7,200 mt compared to February 27.

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Lead Price Forecast:

Recently, supported by domestic macro policy expectations, base metals have generally strengthened. In contrast, in the lead market fundamentals, the divergence in domestic and overseas lead ingot inventories remains unchanged. Meanwhile, the commissioning of new secondary lead capacity in China continues to advance. With rising lead prices, lead smelters have increased production enthusiasm in the short term, driving up demand for raw materials such as scrap batteries. Moving forward, attention should be paid to the marginal increase in lead ingot supply and the rising risk of inventory buildup. Additionally, in 2025, China will allocate ultra-long-term special treasury bonds to support trade-in subsidies for consumer goods such as e-bikes and automobiles, with increased subsidy intensity. The extent to which this trade-in demand offsets the traditional off-season needs to be closely monitored.