Lead Market Got Off to A Strong Start After National Day Holiday, How Will Fundamentals Perform in October? [SMM Analysis]

SMM October 9: As of 15:00 on October 9, LME lead closed at $2,016.5/mt, up 0.69% from the opening price. The most-traded SHFE lead 2511 contract closed at 17,115 yuan/mt, up 0.67% from the opening price, after hitting a session high of 17,155 yuan/mt. Following the National Day & Mid-Autumn Festival holiday, lead prices both domestically and overseas started with gains.

While the Chinese market was on holiday, significant overseas events occurred, including the US government shutdown starting October 1, the first in nearly seven years; on October 4, Sanae Takaichi won the Liberal Democratic Party leadership election, becoming Japan's first female prime minister; Israel accepted the "20-point plan" proposed by Trump, temporarily de-escalating the Israel-Palestine conflict; on October 8, the National Development and Reform Commission (NDRC) held a press conference at the State Council Information Office to detail the "systematic implementation of a package of incremental policies to solidly promote economic improvement, structural optimization, and sustained positive development trends." The most impactful macro event was the US government shutdown, which has forced hundreds of thousands of federal employees into furlough without pay, suspended or delayed some public services, postponed economic aid plans, and affected the release of key economic data. This undoubtedly adds uncertainty to global monetary policy expectations and asset pricing, and has become a key factor driving gold prices to new record highs.

In contrast, LME lead showed a pattern of retreating after a rapid rise during the holiday. Initially (October 1-3), LME lead rose sharply, reaching a high of $2,035/mt by October 3. However, due to accumulating LME lead inventories and a strengthening US dollar index, it gave back some gains towards the end of the holiday (October 6-8). By October 8, LME lead finally closed at $2,005.5/mt, up 0.98% from the pre-holiday (September 30) closing price.

Now that the National Day & Mid-Autumn Festival holidays have ended, upstream and downstream enterprises in the lead industry chain are gradually resuming work, and the domestic spot market has returned to normal trading.Before the holiday, primary lead and secondary lead smelters were mostly in a state of reduced or halted production, particularly concentrated maintenance among secondary lead enterprises in the largest production region, leading to tight regional supply of lead ingots. Coupled with downstream enterprises' customary stockpiling before the holiday, lead ingot inventories decreased significantly. Beyond pre-holiday stockpiling of spot lead ingots, downstream enterprises also pre-purchased a certain volume of lead ingot supply for during and even after the holiday, with cargo pick-up occurring gradually over the holiday period. Consequently, social inventories of lead ingots decreased compared to pre-holiday levels, dropping to the lowest since September 5, 2024, supporting lead prices to fluctuate at highs.

Compared to September, the most significant change in the October lead market is the expected recovery in lead ingot supply. One aspect is the expectation for lead ingot imports. As the import window opened in September, some downstream enterprises or lead smelters pre-purchased imported lead ingots scheduled to arrive in October. According to SMM, most imported lead consists of crude lead, with a smaller portion being refined lead, and transactions are primarily factory-to-factory. Therefore, imported lead ingots arriving at ports will go directly to factories, with little expected to enter the spot circulation market. Another aspect is the expected production resumptions at secondary lead enterprises. In September, several medium and large secondary lead enterprises were under maintenance, a major factor dragging down lead ingot production that month. These enterprises plan to gradually resume production after maintenance in October, expected to contribute to output progressively in mid-to-late October. Latest SMM data shows that as of October 9, the comprehensive weekly operating rate for secondary lead rose to 34%, an increase of 6.5 percentage points from pre-holiday (September 25), with the operating rate in Anhui province increasing by 16.2 percentage points to 35%.

Overall, in the short term, the domestic lead ingot inventory base remains low. Before the expectation of a significant supply increase is realized and transforms into inventory buildup, lead prices are expected to hover at highs. However, once the anticipated supply increase materializes in mid-to-late October, lead prices face the risk of a pullback.

Data Source Statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and SMM's internal database model. These data are for reference only and do not constitute decision-making advice.