Supply Increment Coexists with Raw Material Supply Imbalance, Lead Prices Remain Consolidated at High Levels [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,994.5/mt. The continued fermentation of the US tariff hike news heightened market concerns, causing the trading center of LME lead to gradually shift downward during the Asian session. However, entering the European session, the US dollar index weakened, leading to a rebound in most base metals, with LME lead also attempting to return to $2,000/mt. Ultimately, LME lead closed at $1,994.5/mt, up by 0.38%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,270 yuan/mt. The simultaneous increase in lead ingot supply and the imbalance in raw material supply created a stalemate between bulls and bears in the futures market. After opening, SHFE lead mostly fluctuated between 17,245-17,260 yuan/mt, eventually closing at 17,260 yuan/mt, up by 0.09%. Its open interest reached 48,099 lots, an increase of 544 lots compared to the previous trading day.

》Click to view SMM lead spot historical prices

Macro Perspective: China's Caixin Manufacturing PMI for February stood at 50.8, the highest in three months, with a significant slowdown in the rate of labor contraction. Trump confirmed a 25% tariff hike on Canada and Mexico starting Tuesday, with reciprocal tariffs to be imposed from April 2. Canada stated it is ready with a series of retaliatory measures, including imposing tariffs on US goods worth 155 billion Canadian dollars.

Spot Market Fundamentals:

Yesterday, in the lead spot market, SHFE lead showed an upward fluctuation trend. Suppliers quoted prices in line with the market, with some discounts widening compared to last Friday. Meanwhile, smelters' ex-factory quotes for self-picked cargoes remained relatively firm. Secondary lead smelters stood firm on quotes, with secondary refined lead quoted at discounts of 100-0 yuan/mt against the SMM 1# lead average price on an ex-factory basis. Downstream enterprises maintained purchasing as needed, favoring lower-priced secondary lead or primary lead with significant discounts. Spot market activity was slightly better. Among them, spot orders for primary lead in major production areas were quoted at discounts of 50 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price on an ex-factory basis. In the trade market, quotations in Jiangsu, Zhejiang, and Shanghai were on par with or at discounts of 40-0 yuan/mt against the SHFE 2504 contract.  

Inventory: As of March 3, LME lead inventory decreased by 2,150 mt to 192,275 mt. As of March 3, the total social inventory of lead ingots in five regions monitored by SMM reached 70,200 mt, an increase of 10,300 mt compared to February 24 and an increase of 7,200 mt compared to February 27.

》Click to view the SMM metal industry chain database

Lead Price Forecast:

Recently, primary lead smelters in Hunan and Henan have resumed production after maintenance, leading to a phased increase in supply. In Anhui and Jiangsu, secondary lead enterprises have resumed production, and new capacity has been commissioned, resulting in relatively ample market supply. During this period, the spread between futures and spot prices for lead remained significant. Spot quotations for primary lead in major production areas were at discounts of 250-200 yuan/mt against the SHFE 2504 contract on an ex-factory basis. Suppliers maintained their willingness to transfer to delivery warehouses, with lead ingots continuing to move from in-plant inventory to social warehouses. Additionally, entering March, the trend of simultaneous increases in lead ingot supply and demand remains unchanged. The delivery of the SHFE 2503 contract is approaching, and with the commissioning of new secondary lead capacity, there is still room for further accumulation in social inventories of lead ingots. Meanwhile, as smelters increase production, the demand for raw materials such as scrap batteries is also rising, thereby boosting raw material prices.