Heavy Pollution Weather Disrupts Refined Lead Supply, Lead Futures Stabilize After Decline [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $2,022.5/mt, fluctuated upward during the Asian session, and continued to rise as shorts exited during the European session, reaching a high of $2,055/mt. Before the close, it dropped back slightly and finally settled at $2,040/mt, up $24/mt or 1.19%.

Overnight, the most-traded SHFE lead 2504 contract opened at 17,520 yuan/mt, initially hitting a high of 17,555 yuan/mt before weakening and bottoming at 17,480 yuan/mt. It then rebounded to hover near the daily moving average and eventually closed at 17,520 yuan/mt, up 105 yuan/mt or 0.60%.

》Click to View SMM Lead Spot Historical Prices

Macro: On the US dollar side, traders have fully priced in the possibility of an interest rate cut by the US Fed in June. Traders expect the Fed to cut rates by 75 basis points this year, with the June rate cut already fully priced in. According to the China Passenger Car Association, domestic retail sales of passenger NEVs reached 686,000 units in February, up 79.7% YoY. It is expected that China's passenger car market sales will maintain strong growth in March 2025.

Spot Fundamentals:

In the Shanghai market, Chihong lead was quoted at a premium of 0-50 yuan/mt against the SHFE lead 2504 contract, while Honglu lead was quoted on par with the SHFE lead 2504 contract. In Jiangsu and Zhejiang regions, Tongguan and JCC lead were quoted at a discount of 30-0 yuan/mt against the SHFE lead 2504 contract. SHFE lead fluctuated upward, and suppliers quoted based on market trends, with some waiting for delivery and offering relatively firm quotes. Meanwhile, smelters had limited cargoes self-picked up from production sites. In northern markets, heavy pollution weather led to production and transportation restrictions, causing suppliers to slightly raise premiums compared to last Friday (against the SMM 1# lead average price). Additionally, secondary lead smelters stood firm on quotes, with secondary refined lead quoted at a discount of 75-0 yuan/mt ex-factory against the SMM 1# lead average price, and a few even quoted at a premium of 50-75 yuan/mt. Downstream enterprises mainly purchased through long-term contracts, while spot orders were primarily just-in-time procurement.

Inventory: As of March 11, LME lead inventory decreased by 1,300 mt to 204,900 mt, with the decline mainly from Singapore warehouses. According to SMM, as of March 10, the total social inventory of lead ingots in five major regions tracked by SMM stood at 66,300 mt, down 4,000 mt from March 3 but up 1,500 mt from March 7.

》Click to View SMM Metal Industry Chain Database

Lead Price Forecast Today:

This week marks the week before the delivery of the SHFE lead 2503 contract. SHFE lead strengthened, approaching the 17,500 yuan/mt level, while spot market transactions were weaker than futures, with no narrowing of the spread between futures and spot prices expected. Branded lead continued to be transferred to delivery warehouses, and social inventory of lead ingots rose as expected. On the supply side, primary and secondary lead smelters experienced both resumption and production restrictions, leading to significant regional differences in lead ingot supply. Additionally, heavy pollution weather emerged in Beijing-Tianjin-Hebei and surrounding areas, causing some secondary lead smelters to halt production. In Anhui, certain smelters might be affected by environmental protection inspections, resulting in a slight decline in supply. Furthermore, Hebei, Henan, and Shandong issued yellow and orange heavy pollution weather emergency alerts, potentially restricting vehicle transportation and tightening regional lead ingot supply (mainly reducing circulating cargoes). Attention should be paid to the recovery of lead ingot supply after the heavy pollution weather alerts are lifted.