[SMM Review] Review and Post-Festival Forecast of lead Market

SMM: the US manufacturing, services and non-farm payrolls and other economic data this week (September 30-October 4) were weaker than expected, and given the uncertainty of trade policy, the market expected the Federal Reserve to cut interest rates at least once this year. As of October 4, the dollar index gave up almost all of its pre-holiday gains.

In the case of Lun lead, which continued to destock early, coupled with a decline in the dollar index, Lun lead was strong during the holiday season, as high as $2173 / ton, and broke through the Brin Channel and returned to its highest level in nearly eight months. Lun lead closed at $2169 a tonne as of October 4. LME lead stocks have declined for two consecutive months since August 5, 2019, and also during the National Day period. As of October 4, LME lead stocks reached 69175 tons, 475 tons lower than on September 30, 2019, and 16150 tons lower than on August 5, 2018, and 45425 tons lower than on October 4, 2018.

On the domestic side, due to the market does not hold optimistic expectations for post-festival consumption, funds have been withdrawn, Shanghai lead has been reduced for 4 consecutive days, last Friday (Sept. 30) Shanghai lead main 1911 contract left the market in large quantities at the beginning of the session, promoting Shanghai lead to rapid pull-up, but continued to reduce positions within the day, it is difficult to successfully stand on the Wan Qi pass, Shanghai lead in the 20th EMA pressure fell back, and finally reported at 16920 yuan / ton.

On the spot side, the news of environmental protection and production limits continued to ferment, coupled with the strong upsurge of lead, the Shanghai market spot mainstream reported to 17000-17050 yuan / ton, or the 1910 contract discount 20 yuan / ton to the flat water quotation, and the downstream reserve warehouse basically ended, traders are also on holiday one after another, spot Wanqi near the transaction difficulties.

SMM expects that after the festival, Lun lead will need to continue to pay attention to whether LEM lead stocks continue to decline, which will provide power for Lun lead to successfully break through the previous high of $2179.5 / ton. Shanghai lead, boosted by the trend of lead, may have a supplementary action at the beginning of the festival, but the subsequent Shanghai lead 1911 contract can successfully stand on the Wan Qi level (20-day moving average), depends on the accumulation of social inventory after the festival. Considering that before the National Day, lead smelters in Hebei, Henan and other places have heavy pollution weather to limit production, it is expected that the accumulated storage volume of lead ingots during the National Day may be lower than that of the same period last year.

In the spot aspect, due to the recent downstream battery market consumption, storage enterprises during the National Day holiday time is not long, more than 1-3 days, the first week after the festival on lead ingots or have a certain replenishment demand; at the same time, heavy pollution weather production limit lifted, lead smelting enterprises to resume work, the supply situation will be from the tight state before the festival to loose, the supply and demand pattern of the spot market may change, it is expected that more than seven spot trading volume will still be limited.

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