The Widening Spread Between Futures and Spot Prices Promotes Transfer to Delivery Warehouse, Social Inventory of Lead Ingots Rises to a Nearly 3-Month High [SMM Lead Ingot Social Inventory]

As of February 20, according to SMM, the total social inventory of lead ingots in five major regions tracked by SMM reached 59,600 mt, an increase of 7,300 mt compared to February 13 and an increase of 6,200 mt compared to February 17. After the Chinese New Year holiday, upstream and downstream enterprises in the lead industry chain have resumed normal production. In particular, the production of secondary lead enterprises has increased, coupled with the commissioning of new capacity in regions such as Guizhou and Jiangxi. Overall, the supply growth has outpaced demand, and the trend of inventory buildup for lead ingots remains unchanged. Currently, supply in the two major lead-producing regions, Henan and Anhui, is stable with a slight increase. However, downstream enterprises, due to the mediocre performance of end-use consumption in the lead-acid battery market, have shown low enthusiasm for production and procurement, relying more on just-in-time procurement, which cannot absorb additional lead cargoes. As of February 20, ex-factory quotations for cargoes self-picked up from production sites in Henan for primary lead were quoted at premiums of -260 to -240 yuan/mt against the SHFE 2503 contract. The widening spread between futures and spot prices has increased suppliers' willingness to transfer to delivery warehouses. The movement of in-plant inventory to delivery warehouses by smelters has not ceased despite the conclusion of the previous delivery cycle. It is expected that the social inventory of lead ingots will continue to rise in the short term.