Delivery and Inventory Transfer Lead to Increased Social Inventory; Future Lead Inventory Requires Attention to the Consumption Side [SMM Analysis]

As of January 13, according to SMM, the total social inventory of lead ingots across five regions tracked by SMM reached 47,600 mt, down 600 mt from January 6 but up 1,700 mt from January 9. This week, the SHFE lead 2501 contract is expected to enter delivery, with delivery brands being transferred to delivery warehouses, resulting in a certain inventory increase. Compared with last month's delivery, the delivery volume of lead ingots this time has significantly decreased from December. The main reasons are as follows: since late December, SHFE lead prices have dropped sharply, while the spot market supply was relatively tight at that time. Spot cargoes were generally sold at a premium of 50-200 yuan/mt against the SHFE lead 2501 or 2502 contracts on an ex-factory basis, and suppliers generally preferred to sell spot cargoes. Additionally, as the Chinese New Year falls at the end of January, considering the suspension of logistics and downstream holidays, suppliers mostly sold January cargoes in late December and accelerated shipments after entering January. Therefore, the delivery volume of lead ingots in this round was relatively small, and the inventory buildup in social warehouses caused by delivery was limited. Furthermore, it is worth noting that with the start of the Spring Festival travel rush, some downstream enterprises are expected to take holidays, leading to weaker consumption and increasing the risk of inventory buildup for lead ingots. After logistics operations are suspended, lead ingot inventories will mainly be reflected in smelters' in-plant inventories.