Domestic Ore and Scrap Costs Diverge, Short-Term Lead Prices Expected to Remain in the Doldrums [SMM Lead Morning Meeting Summary]

Futures:

Overnight, LME lead opened at $1,990/mt. After opening, LME lead showed weak performance, declining in a stepwise pattern throughout the day. Particularly during the night session, pressured by the strong US dollar index, its trading center shifted downward to around $1,975/mt, eventually closing at $1,978/mt, down 0.6%.

Overnight, the most-traded SHFE lead 2510 contract opened at 16,895 yuan/mt. Influenced by the decline in LME lead and loosening domestic scrap costs, SHFE lead fell rapidly after opening, fluctuating downward during the session and approaching 16,800 yuan/mt, eventually closing at 16,820 yuan/mt, down 0.56%. Open interest increased by 62 lots to 49,762 lots compared to the previous trading day.

On the macro front:

The US nonfarm payroll annual revision was worse than expected, downwardly revised by 911,000, increasing pressure on the US Fed to cut interest rates. This marks the largest downward revision since 2000. More signs of labor market weakness will add new justification for Trump's push for Fed rate cuts. The US Supreme Court will expedite the hearing of Trump's tariff case. The court announced it will hear oral arguments in the first week of November and agreed to fast-track this major trade dispute. Meanwhile, Macron appointed France's fifth prime minister, still facing a 3 trillion euro debt crisis.

:

In yesterday's lead spot market, SHFE lead continued to hold up well. Suppliers adjusted quotations according to market conditions, with some refusing to budge on prices. In Jiangsu, Zhejiang, and Shanghai, quotations against the SHFE lead 2510 contract were at discounts of 50-0 yuan/mt. Downstream enterprises only made just-in-time procurement, resulting in sluggish spot order transactions. Additionally, cargoes self-picked up from electrolytic lead smelters showed significant regional differences in sales. Spot discounts widened in South China, while transactions improved slightly in North and Central China due to upcoming maintenance at some smelters. For secondary lead, higher lead prices slightly boosted suppliers' willingness to sell. Secondary refined lead quotations against the SMM #1 lead average price ranged from discounts of 50 yuan/mt to premiums of 50 yuan/mt ex-works.

Inventory: As of September 9, LME lead inventory decreased by 3,800 mt to 239,325 mt. SHFE lead warrant inventory totaled 53,820 mt, up 25 mt from the previous day.

Today's lead price forecast:

In September, China's lead market faces weak supply and demand. The spot market continues to trade at discounts, which may weigh on lead prices, keeping them in the doldrums. Meanwhile, maintenance and production cuts at primary and secondary lead smelters progress, but lead concentrate and scrap battery prices show significant divergence. As secondary lead smelters cut production more aggressively, scrap battery prices gradually decline, improving secondary lead profitability. However, the maintenance at primary lead enterprises did not reduce the procurement demand for lead concentrates. In September, lead concentrate TCs declined again, with the two major raw material costs moving in opposite directions, leaving limited downside room for short-term lead prices.

Data source statement: Except for publicly available information, other data are processed by SMM based on public information, market exchanges, and the SMM internal database model, for reference only and not constituting decision-making advice.