Downstream buyers favor warrants, driving social inventory of lead ingots to fall at a faster pace

SMM News on May 26: According to SMM, as of May 26, the total social inventory of lead ingots across five regions tracked by SMM reached 43,400 mt, a decrease of 15,700 mt from May 19 and a decrease of 6,900 mt from May 22.

Recently, the lead-acid battery market is in the traditional consumption off-season, with limited procurement demand for lead ingots from downstream enterprises. Meanwhile, the production of primary lead and secondary lead enterprises has steadily increased, providing downstream enterprises with more procurement options. Just-in-time procurement tends to favor lower-priced sources. Among them, quotations for cargoes self-picked up from primary lead smelters were at discounts of 30 yuan/mt to premiums of 100 yuan/mt against the SMM 1# lead average price on an ex-factory basis. Quotations for secondary refined lead were at discounts of 50 yuan/mt to premiums of 50 yuan/mt against the SMM 1# lead average price. Warrant sources in Jiangsu, Zhejiang, and Shanghai were quoted at discounts of 20-0 yuan/mt against the SHFE lead 2506 contract. Considering factors such as the spread between futures and spot prices, transportation distance, and freight costs, downstream enterprises tend to favor primary lead for procurement, with a preference for warehouse sources closer to consumption areas. As a result, the decline in social inventory of lead ingots has further widened. In contrast, smelters are facing difficulties in reducing their in-plant inventory, with some enterprises still experiencing inventory buildup.