The SHFE/LME price ratio is showing a downward trend. After August and September, can imported lead impact the domestic market again? [SMM Analysis]

According to customs data, in September 2024, refined lead exports were 895 mt, up 393.17% MoM, down 97.48% YoY; from January to September, the total export volume of refined lead and lead materials was 33,367 mt, down 77.85% YoY. In September 2024, refined lead imports were 28,640 mt, and lead alloy imports were 14,386 mt; from January to September, the total import volume of refined lead and lead materials was 187,233 mt, up 392.9% YoY.

In September, LME lead largely replicated the trend of August, forming another large "V" pattern. LME lead inventory was mostly in a state of drawdown, but on September 17, there was an unexpected single-day inventory buildup of 30,000 mt, causing a significant drop in LME lead prices. Meanwhile, the domestic market was dragged down by the arrival of imported lead and weakened lead consumption, leading to a noticeable inventory buildup of lead ingots and a further decline in lead prices compared to August. The most-traded SHFE lead contract once fell to 16,245 yuan/mt, hitting a new six-month low. It wasn't until late September, when China released a package of incremental monetary policies, that the stock market surged, and commodities broadly turned positive, allowing lead prices to stop falling and rebound. However, overall, the SHFE/LME price ratio declined in September, and import conditions were far less favorable than in August.

In early October, due to the National Day holiday, upstream and downstream enterprises had different holiday schedules, leading to a temporary lack of lead consumption. This period saw the highest inventory buildup pressure throughout October. In mid-to-late October, as lead-acid battery enterprises resumed production, coupled with seasonal consumption and policy benefits reaching the end-use sector, social inventory of lead ingots gradually declined, potentially providing some momentum for lead prices. Overall, we do not expect significant changes in refined lead import volumes in October.