[SMM Analysis: Downstream Just-in-Time Procurement Favors Warrant Cargoes, Social Inventory of Lead Ingots Declines at a Faster Rate]

SMM May 26 News: According to SMM, as of May 26, the total social inventory of lead ingots across five locations 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. Downstream enterprises have more procurement options, and just-in-time procurement favors lower-priced cargoes. Specifically, 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 ex-factory. 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. Meanwhile, warrant cargoes in Jiangsu, Zhejiang, and Shanghai were 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' procurement favors primary lead, with a preference for warehouse cargoes closer to consumption areas. As a result, the decline in the 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.