Domestic and International Inventory Divergence During the Holiday: Are Lead Prices Driven by Macro Factors or Fundamentals? [SMM Analysis]

As of 15:00 on October 8, LME lead closed at $2,122.5/mt, down 1.32% from the opening price. The most-traded SHFE lead contract closed at 16,880 yuan/mt, down 1.23% from the opening price. On the first trading day after the National Day holiday, both domestic and international lead prices jumped initially and then pulled back.

During the Chinese market closure for the National Day holiday, the overseas market was buoyed by positive news of China's comprehensive monetary policy measures, leading LME lead to fluctuate upward. LME lead mostly traded above $2,100/mt, peaking at $2,167/mt, marking a new three-month high. As of the close on October 7, LME lead was at $2,153/mt, up 2.11% from the pre-holiday close on September 30.

Looking at the inventory changes of lead ingots domestically and internationally before and after China's National Day. In 2023, LME lead inventory was 78,325 mt before the holiday (September 29) and 84,600 mt after the holiday (October 6), with an increase of 6,275 mt during the holiday. In 2024, LME lead inventory was 200,350 mt before the holiday (September 30) and 198,625 mt after the holiday (October 7), with a decrease of 1,725 mt during the holiday. The differing changes in LME lead inventory contributed to the stronger trend of LME lead during China's National Day in 2024.

In contrast, in the Chinese market, primary lead smelters mostly maintained normal production during the National Day holiday, while some secondary lead enterprises took breaks. Downstream lead-acid battery companies mostly took holidays ranging from 1 to 7 days, leading to a temporary absence of lead consumption, and post-holiday lead ingot social inventory increased as expected. According to an SMM survey, as of October 8, 2024, the total social inventory of SMM lead ingots in five regions reached 53,400 mt, an increase of 7,900 mt from September 30. Compared to the same period last year, as of October 7, 2023, the total social inventory of SMM lead ingots in five regions was 76,000 mt, a decrease of 2,100 mt from the pre-holiday level on September 28.

Entering October, the lead market is expected to see an increase in both supply and demand, but the supply increase is expected to outpace consumption. According to preliminary SMM surveys, primary and secondary lead smelters have completed maintenance, and new capacity has been commissioned, with October lead production expected to increase by 30,000 to 40,000 mt. On the consumption side, domestic trade-in policies in electric bicycles and cars, along with the seasonal replacement of lead-acid batteries in winter, are expected to lead lead-acid battery companies to resume normal production after the National Day holiday. Many automotive battery companies plan to increase production in October, with some reaching full capacity.

In the short term, the accumulated lead ingot inventory during the National Day holiday is difficult to quickly digest. Considering the upcoming delivery of the SHFE lead 2410 contract, holders are gradually transferring lead ingots to delivery warehouses, leaving room for further increases in social inventory before delivery. Additionally, domestic RRR cuts and interest rate cut policies are gradually being absorbed by the market, and lead prices may return to being driven by fundamentals.