According to SMM survey, social lead ingot inventory across five major regions in China totalled 57,200 mt as of August 25, down 2,200 mt from August 18 and 1,100 mt from August 14.
Typically, the 25th of each month is the settlement day for long-term contracts of most lead smelting enterprises. Recently, the continuous price gains of lead depressed lead consumption. Considering the cost factor, downstream enterprises mainly purchased lead under long-term contracts. However, last week is the final week for the delivery of long-term lead contracts in August. As the lead smelting enterprises lacked inventory at the beginning of the week, some downstream buyers turned to purchase social inventory.
The most active SHFE lead prices reached a maximum of 16,565 yuan/mt last week, and set a new high since August 10, 2020, which dampened the enthusiasm for downstream procurement. At the same time, the price spread between spot cargoes and lead contract prices expanded significantly, prompting some sellers to deliver cargoes to warehouses. This grew inventories at delivery warehouses. The production at producers of deliverable primary lead brands has gradually recovered, but the improvement in lead consumption seems insignificant. This, combined with the large price difference between spot cargoes and futures contracts may prompt sellers to continue to deliver cargoes to warehouses. Social inventory of lead ingots will stop falling and increase.
