Production Cuts Coexist with Off-Season, Lead Prices Fluctuate [Institutional Commentary]

On Tuesday, the most-traded SHFE lead PB2506 contract initially declined and then rebounded during the day, with its center shifting downward at night, while LME lead closed lower. Spot market: In the Shanghai market, Chihong lead was quoted at 16,990-17,045 yuan/mt, with a premium of 50-80 yuan/mt against the SHFE lead 2505 contract; Jijin lead was quoted at 16,940-16,995 yuan/mt, with a premium of 0-30 yuan/mt against the SHFE lead 2505 contract. In the Jiangsu-Zhejiang region, JCC lead was quoted at 16,940-16,995 yuan/mt, with a premium of 0-30 yuan/mt against the SHFE lead 2505 contract. SHFE lead showed a high-level consolidation trend, with suppliers actively quoting and selling, and warehouse cargo premiums were lowered. Meanwhile, the discounts for cargoes self-picked up from production sites of some primary lead smelters expanded again (against the SHFE lead 2505 contract). Downstream enterprises maintained purchasing as needed, with some rigid demand favoring low-priced secondary lead sources. SMM: A secondary lead smelter in central China cut production by 50% due to insufficient raw materials, with current refined lead daily production at 200-300 mt. A secondary lead smelter in east China previously reduced production due to tight raw material supply. The company stated that lead ingot sales were sluggish and cost pressure was significant, and it plans to maintain production at around 100 mt/day in the near future. A secondary lead enterprise in east China, with a normal daily production of 700 mt, reduced production again to 300-400 mt/day this week due to raw material shortages, with the recovery time yet to be determined.

Overall, dragged down by the decline in LME lead, the center of SHFE lead shifted downward. Currently, the price of used batteries continues to rise, secondary lead smelters are facing losses, the scope of production cuts has expanded, and some have postponed resumption of production, weakening supply pressure and supporting lead prices. However, the battery consumption off-season, limited restocking for the May Day holiday, and some companies planning to take holidays during May Day have resulted in weak demand, limiting the rebound space. It is expected that lead prices will fluctuate in the short term.