Lead Prices Rose Nearly 3% in February; Macro Stimulus Is Expected to Drive Lead Prices Higher in March, While Fundamentals "Lag Behind"? [SMM Monthly Outlook]

In February, following the Chinese New Year holiday, the most-traded SHFE lead contract surged over 2% on the first trading day after the holiday and then fluctuated rangebound overall. As of February 28, the most-traded SHFE lead contract closed at 17,190 yuan/mt, up 0.15%, with a monthly increase of 2.9%. The center of lead prices shifted significantly higher compared to January.

In March, during the Two Sessions in China, numerous policies aimed at boosting the economy were proposed, alleviating market concerns over US tariff hikes. The domestic non-ferrous metals market broadly turned positive, with SHFE lead also fluctuating upward, reaching 17,530 yuan/mt on March 7, the highest level since December 23, 2024.

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In the spot market, according to SMM spot quotes, the center of SMM 1# lead ingot spot prices also shifted higher compared to January. As of February 28, the average spot price of SMM 1# lead ingot was 16,925 yuan/mt, up 325 yuan/mt or 1.96% from 16,600 yuan/mt on January 27.

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Fundamental Review

Primary Lead:

According to an SMM survey, the operating rate of domestic primary lead smelters in February was 60.87%, down 14.52 percentage points MoM. In terms of production, national primary lead production in February 2025 continued its downward trend, with a MoM decline of 4.13 percentage points but a slight YoY increase of 0.78 percentage points.

SMM reported that the Chinese New Year holiday spanned late January to early February, leading to further declines in primary lead production due to holiday breaks, maintenance, and technological upgrades at smelters. Production decreased for three consecutive months. Although lead smelters in Inner Mongolia, Hunan, Yunnan, and Guangdong resumed production after January maintenance, large and medium-sized smelters in Henan, Hunan, and Yunnan underwent subsequent maintenance, either routine or due to unexpected equipment failures. Additionally, February's shorter working days (only 28 days) further dragged down primary lead production.

Secondary Lead:

According to SMM data, the operating rate of secondary lead smelters in February was 31.66%, down 8.97 percentage points MoM. An SMM survey revealed that in January, the strong Chinese New Year atmosphere led to earlier holiday breaks for downstream battery producers, weakening pre-holiday stockpiling demand. Difficult lead ingot transactions and poor profits caused more secondary lead smelters to reduce or halt production, resulting in a MoM production decline of over 65,000 mt in February. After the Lantern Festival, secondary lead smelters began resuming production. However, due to some large enterprises starting production near month-end and the furnace heating cycle, the production increase will only be reflected in March. Additionally, apart from smelters planning to resume production in March, new secondary lead capacity may gradually come online in March. Currently, large new smelters in Guizhou and Jiangsu are preparing raw materials for production trials. Data suggests that secondary lead production in March may increase by over 90,000 mt.

Inventory:

According to SMM data, after the Chinese New Year holiday, SMM five-region lead ingot social inventory continued to build up in February. As of February 27, the total inventory in these regions reached 63,100 mt, up 23,900 mt from the end of January. As of February 6, the latest inventory in these regions was 64,800 mt.

In early February, as the Chinese New Year holiday ended, upstream and downstream enterprises in the lead industry chain gradually resumed production, and logistics recovered, leading to a gradual recovery in the lead spot market. However, during the holiday, primary lead smelters operated on shift work far more than lead-acid battery enterprises, resulting in a continuous inventory buildup of lead ingots at smelters after the holiday. Additionally, most downstream enterprises conducted routine pre-holiday stockpiling of lead ingots, limiting their demand for lead ingots in the early stages of resumption. As a result, smelters transferred more inventory to social warehouses, driving the continuous inventory buildup in February.

Downstream Consumption:

According to an SMM survey, downstream lead-acid battery enterprises experienced a decline in operating rates in February due to the Chinese New Year holiday and weaker-than-expected end-use consumption. In early February, lead-acid battery enterprises began initial post-holiday operations. From February 1 to February 12, after the Lantern Festival, most workers returned to their posts, and major enterprises gradually ramped up production. However, after this year's Chinese New Year, end-use consumption in the lead-acid battery market for e-bikes and automobiles remained sluggish, with dealers generally holding a pessimistic outlook. The usual post-holiday restocking "mini-peak" did not materialize this year. Additionally, with lead prices significantly higher than in January and raw material prices elevated, most enterprises adopted a produce-based-on-sales approach, with operating rates ranging from 50% to 100%. Among them, ESS battery enterprises had relatively better orders, with some operating at full capacity.

Overall, in February, on the supply side, primary and secondary lead smelters saw further production declines due to the Chinese New Year holiday, equipment maintenance, and upgrades. Secondary lead enterprises, in particular, resumed production only after the Lantern Festival, reducing actual production time compared to January, making it the largest contributor to the decline in lead ingot supply for the month. On the consumption side, the lead-acid battery market gradually recovered after the holiday, with major enterprises resuming normal production. However, end-use consumption fell short of expectations, and producers showed low enthusiasm for production, mostly adopting a produce-based-on-sales approach. Consequently, demand for lead ingots improved only slightly, and transactions in the lead spot market remained sluggish throughout the month.

On the first trading day after the Chinese New Year holiday, lead prices saw a "good start" due to high expectations for a recovery in consumption. Subsequently, raw material supply issues continued to constrain the market. As secondary lead enterprises resumed production and new enterprises began operations, demand for scrap from secondary lead smelters increased further, driving scrap prices upward again and pushing costs higher. Meanwhile, for lead concentrates, the commissioning of new lead-zinc mines increased supply, especially for zinc concentrates, which saw a significant rise in TCs. However, lead concentrates, supported by high demand, struggled to see a similar increase in TCs. Raw material supply issues became one of the key factors supporting lead prices.

March Lead Market Outlook

Macro-wise, attention should remain on the risk of US tariff hikes, including those targeting China, Canada, and Mexico. Trade frictions and geopolitical factors will continue to impact global economic development, leaving traders with lingering concerns.

From a fundamental perspective, with the Chinese New Year holiday factors resolved, the lead market in March is expected to see increases in both supply and demand. Against the backdrop of macroeconomic support from the Two Sessions, SHFE lead may continue to rise. However, in the latter half of the month, the focus should shift to fundamentals. SMM expects supply growth in March to outpace demand growth, primarily driven by the resumption of secondary lead enterprises and the commissioning of new capacity. However, it is worth noting that heavy pollution weather recently occurred in the Beijing-Tianjin-Hebei region and surrounding areas, causing some secondary lead smelters to halt production. Additionally, some smelters in Anhui may experience slight supply declines due to environmental protection inspections. Furthermore, yellow and orange heavy pollution weather alerts have been issued in Hebei, Henan, and Shandong, potentially restricting vehicle transportation and tightening regional lead ingot supply (mainly reducing circulating cargo). Attention should be paid to the recovery of lead ingot supply after the heavy pollution weather alerts are lifted.

On the consumption side, as the e-bike and automotive battery markets enter the traditional consumption off-season in March, market expectations for consumption growth remain low. However, it is worth noting that the 2025 government work report emphasized the allocation of ultra-long-term special bonds to support trade-in policies for consumer goods, such as subsidies for e-bike and automobile trade-ins. Therefore, attention should be paid to the extent to which trade-in demand offsets the traditional off-season. Overall, SMM expects lead prices in March to show a trend of rising first and then falling. Key points to watch include the commissioning progress of new secondary lead capacity, the impact of heavy pollution weather on refined lead supply, the extent to which trade-in policies offset the traditional off-season, and raw material supply issues.

For more exciting content, please follow SMM's China Lead Industry Chain Monthly Report, released in the middle or early part of each month. Institutional Comments

Ruida Futures stated that on the fundamentals, primary lead smelters mainly focused on production recovery last week, with operating rates increasing. As primary lead production gradually returns to full capacity, production at primary lead smelters may stabilize. For secondary lead, limited scrap battery availability, rising raw material costs, and sluggish selling prices have narrowed profits, with some smelters entering a loss-making state, potentially affecting their production resumption plans. On the demand side, lead ingot procurement enthusiasm remains low. Overall, cost support and weak consumption guide lead prices. In terms of operations, it is recommended to focus on short-term fluctuations in the most-traded SHFE lead contract, paying attention to operational rhythm and risk control.

Southwest Futures noted that lead concentrate TCs remain stable, with some primary lead enterprises planning maintenance and production cuts, leading to a slight decline in primary lead production. In some regions, scrap availability has increased, boosting secondary lead production. Lead-acid battery enterprises' operating rates have not shown significant improvement, but under the influence of trade-in policies, some large battery enterprises intend to moderately increase operating rates in March. Last week, social inventory of primary lead increased by 4,100 mt. Attention should be paid to the extent of consumption improvement, with a slightly bullish outlook on lead prices.

Guotou Futures commented that domestic trade-in subsidies have been increased, improving expectations for lead-acid battery consumption and partially offsetting the impact of the off-season. Bulls entered the market, breaking the upper resistance level of the previous consolidation range for SHFE lead. Capital inflows reached 102 million yuan, and moving averages formed a golden cross. In March, new secondary lead capacity will be concentrated, scrap battery prices are more likely to rise than fall, the import window remains closed, TCs remain low, and strong cost support makes SHFE lead unlikely to fall significantly. However, expectations for increased production at smelters remain strong, and off-season consumption performance needs to be verified. The market is watching resistance in the 17,500-17,800 yuan/mt range during the rebound.