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The trend of spot prices is in line with the futures. According to SMM, SMM 1# lead reported 14325 yuan/mt on average, down 475 yuan/mt or 3.2% from the beginning of September.
On the fundamentals, the primary lead, secondary lead and lead acid battery have all been affected by multiple factors including operating losses, power rationing and environmental protection. Specifically speaking, the operating rates of primary lead fell 5.25% to 56.3% from the beginning of September. The weekly operating rates of secondary lead have been falling since mid-August due to expanding operating losses and other factors.
In terms of inventory, the social inventory of lead ingot has been on the rise since the end of April, and keeps recording new highs since 2014. The supply of primary lead, secondary lead and lead acid battery fell greater than the demand, thus the inventory finally recorded declines by end of September. According to SMM, the social inventory of lead ingot across five major markets in China totalled 206,200 mt as of September 30, up 143,600 or 229.4% mt from end-April.
On the demand side, the September has been the traditional seasonal high for the consumption of lead acid battery. Most downstream companies will carry out routine re-stocking before the National Day holiday, but with varying demand level. For primary and secondary lead, the supply declined due to power rationing, operating losses and environmental protection. While the influence to the demand side has been less severe than the supply side, thus most smelters have made deliveries by holding prices firm with premiums.
In October, the factors of power rationing and environmental protection after the National Day holiday remain as the market focus. On the other hand, many deliverable brands of primary lead will start maintenance in October, which will affect the capacity by more than 20,000 mt/month. Meanwhile, the in-plant inventory of primary lead smelters during the National Day holiday is also worth attention.
In general, SMM believes that the lead prices will hover at high levels in October as the supply has not yet picked up, and the inventory of lead ingots has been falling. The market shall also keep an eye on the operating profits of secondary lead in mid and late October.
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