Ingot Production Increase vs. Raw Material Cost Rise: Lead Prices Remain Strong [SMM Lead Morning Comment Dec 6]

Overnight, LME lead opened at $2,087.5/mt. Overseas lead ingot inventory slightly decreased, while the US dollar further weakened, leading to a general strengthening of base metals. During this period, LME lead continued to fluctuate upward, reaching a peak of $2,100/mt, setting a new one-and-a-half-month high. By the end of the session, it closed at $2,098/mt, up 0.55%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,610 yuan/mt. Driven by the rise in LME lead, bulls increased their positions, pushing the center of SHFE lead upward to above 17,700 yuan/mt. By the end of the session, it closed at 17,710 yuan/mt, up 0.57%. Its open interest reached 56,040 lots, an increase of 806 lots from the previous trading day.

Macro side, Chinese Finance Minister Lan Fo'an stressed accelerating the implementation of a package of hidden debt resolution policies: expedite bond issuance and usage to maximize policy and fund effectiveness as soon as possible; resolutely curb new hidden debts and improve local government debt management; promote the reform and transformation of financing platforms, and firmly prevent illegal provision of new financing services to local governments. France has entered a caretaker government period, with Macron accepting Prime Minister Barnier's resignation.

Fundamental side, domestic lead ingot social inventory is decreasing, and lead prices continue to fluctuate upward. Meanwhile, it is important to note that secondary lead profits are improving, increasing the production enthusiasm of smelting enterprises. Attention should be paid to the resumption of production and the release of new capacity in secondary lead enterprises. The expectation of increased production in secondary lead enterprises leads to a rise in demand for scrap, thereby raising battery scrap prices, which could indirectly reduce the profit margin of secondary lead. Additionally, next week is the week before the delivery of the SHFE lead 2412 contract, and we need to monitor the risk of explicit inventory accumulation due to the transfer of lead ingots to warehouses for delivery.