Macro Impact Fades, Lead Price Trading Logic Returns to Fundamentals This Week

This week, the macroeconomic data mainly include China's YoY total electricity consumption in October, China's YoY total retail sales of consumer goods in October, China's YoY industrial added value above designated size in October, US unadjusted YoY CPI in October, and US MoM retail sales in October. Additionally, the State Council Information Office will hold a press conference on the national economic operation, and Fed Chairman Powell will deliver a speech.

For LME lead, with the US election and interest rate decision concluded, the macro risk factors decrease, and the focus returns to fundamentals. From the inventory perspective, overseas lead inventory continues to decline, and the LME lead 0-3 contango/backwardation remains stable. Meanwhile, the previous news of lead-zinc mine accidents and production halts has been digested by the market. It is expected that LME lead will maintain a consolidation trend this week, operating in the range of $2,000-2,085/mt.

For domestic SHFE lead, social inventory of lead ingots rises, while inventory at lead smelters declines, reducing the market circulating supply. Both primary and secondary lead tend to trade at a premium (to SMM 1# lead average price). This week, on one hand, we need to pay attention to the risk of visible inventory accumulation brought by the transfer of lead ingot inventory for delivery. On the other hand, we need to monitor the production resumption plans of secondary lead enterprises after the lifting of environmental protection factors, and be wary of the risk of lead prices jumping initially and then pulling back. It is expected that the most-traded SHFE lead contract will operate in the range of 16,600-17,100 yuan/mt.

Spot price forecast: 16,450-16,800 yuan/mt. The supply of lead ingots is relatively limited, mainly due to the continuous postponement of production resumption plans by secondary lead smelters and limited profit recovery for secondary lead, leading many refineries to stand firm on quotes. For primary lead, the delivery factor needs to be considered, reducing the circulation of cargo in the spot market, and the spread between futures and spot prices may narrow. Lead consumption is steadily increasing, and downstream enterprises restock as needed.