Downstream Rigid Demand Stockpiling and Smelter Inventory Decline Lead Prices Continue to Fluctuate at Highs [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $2,008.5/mt. During the Asian session, it moved sideways around the daily moving average. Entering the European session, it rose to a high of $2,015/mt before coming under pressure and pulling back, touching a low of $2,001/mt, and finally closed at $2,004/mt, down $1/mt or 0.05%.

Overnight, the most-traded SHFE lead contract opened at 17,105 yuan/mt. At the beginning of the session, it fell to a low of 17,100 yuan/mt and then moved sideways, eventually closing at 17,125 yuan/mt, up 15 yuan/mt or 0.09%.

On the macro front: According to data released by the US Labor Department on Thursday, for the week ending September 13, initial jobless claims in the US were 231,000, compared with an expectation of 240,000 and a previous value of 263,000. This data pulled back significantly from the unusually high level of the previous week, returning to the normal range of the past four years. At its 10,000th meeting, the UN Security Council voted on a draft resolution concerning a ceasefire in Gaza proposed by 10 non-permanent members. The draft resolution was not adopted due to the US, a permanent member, casting a veto again. The State Council Information Office held a press conference to introduce policies and measures related to expanding service consumption.

Spot fundamentals:

In the Shanghai market, Chihong and Honglu lead were quoted at parity against the SHFE lead 2510 contract; in the Jiangsu-Zhejiang market, JCC and Jijin lead were quoted at premiums of -40~0 yuan/mt against the SHFE lead 2510 contract. SHFE lead continued to hold up well. Suppliers quoted prices in line with the market, and due to tight regional supply of lead ingots, suppliers had significant differences in their willingness to sell, especially with notable north-south differences in cargoes self-picked up from smelters' production sites. In central China, most transactions were at a premium (against the SMM #1 lead average price), while in southern China, transactions were generally at a discount. Additionally, there were also supply differences in secondary lead. Secondary refined lead was quoted at premiums ranging from -170 yuan/mt to +25 yuan/mt against the SMM #1 lead average price ex-works. Downstream enterprises had a strong wait-and-see sentiment, either mainly procuring through long-term contracts or making just-in-time procurement of some spot cargoes, resulting in varied market transactions.

Inventory: As of September 18, LME lead inventory increased by 2,675 mt to 222,675 mt. According to SMM, as of September 18, the total social inventory of lead ingots across five regions stood at 67,600 mt, up about 600 mt from September 11 but down 1,300 mt from September 15.

Today's lead price forecast:

Regarding smelter inventory, as downstream enterprises gradually picked up the lead ingots pre-purchased last week, lead smelters' inventory declined, and individual enterprises experienced tightness in cargo pick-up. With the delivery period over, lead ingots re-entered the circulation market. Downstream enterprises made purchases as needed, and social inventory of lead ingots declined as expected. On the supply side, primary lead smelters in North and Central China underwent both maintenance and resumption of operations this week, while secondary lead smelters in Anhui remained under maintenance. Considering the upcoming National Day holiday, some downstream enterprises still have certain pre-holiday stocking demand. However, primary lead smelters are expected to gradually resume operations by the end of September after maintenance. If lead ingot supply is anticipated to increase subsequently, social inventory of lead ingots may struggle to maintain a downward trend, and upward pressure on lead prices will persist, with short-term prices continuing to fluctuate at highs.