After the Release of Favourable Macro Sentiment, Lead Prices May Return to Fundamentals

Next week, China will celebrate the National Day. SHFE will not conduct night session trading on September 30, and will be closed from October 1-7, resuming normal trading on January 8. There will be significant economic data, such as China's September official manufacturing PMI, US September ISM manufacturing PMI, US September ADP employment, US September unemployment rate, and US September seasonally adjusted non-farm payrolls. In addition, China's economic stimulus policies will be introduced intensively, focusing on the subsequent policy transmission and market consumption transformation.

Regarding LME lead, driven by China's economic stimulus policies, LME lead hit a new two-month high. From the perspective of inventory changes, after a significant accumulation in LME lead inventory last week, it has now shifted to a destocking trend. Although the LME lead 0-3 discount widened compared to last week, it is reasonable given the increase in LME lead during the week. Next week, after the macro sentiment is fully released, lead prices may return to fundamentals, with LME lead expected to operate between $2,045-2,175/mt.

For domestic SHFE lead, due to the National Day holiday, there is only one trading day for SHFE lead, and we need to pay more attention to market changes after the holiday. According to SMM survey, during the National Day holiday, many downstream enterprises plan to take a break, while lead smelters will mostly maintain normal production, leading to a higher risk of inventory accumulation in the lead market after the holiday. After the release of favourable macro sentiment, lead prices need to focus more on the actual consumption of policy transformation. It is expected that after the holiday, the most-traded SHFE lead contract will operate between 16,500-17,250 yuan/mt.

Spot price forecast: 16,350-16,900 yuan/mt. On the consumption side, downstream enterprises plan to take a holiday for 0-7 days during the National Day, leading to a temporary reduction in lead consumption. On the supply side, the resumption and new production of primary and secondary lead smelters in October are gradually advancing, with a significant increase in lead ingot supply expected. Due to the different holiday plans of upstream and downstream enterprises, the pressure of lead ingot inventory accumulation will rise after the holiday. Meanwhile, after the National Day holiday, the delivery of the SHFE lead 2420 contract will be on the agenda, and unreported inventory will become reported inventory.