Low Inventory Supports Lead Prices Holding Up Well, Caution Advised on Subsequent Supply Recovery Expectations [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $2,002.5/mt and held up well throughout the day, particularly during the Asian session when it rose from around $2,000/mt to above $2,020/mt, then hovered at highs, reaching an intraday high of $2,034/mt. By the close, LME lead gave back some gains, finally settling at $2,020.5/mt, up 0.75%.

Overnight, the most-traded SHFE lead 2511 contract opened at 17,135 yuan/mt. Boosted by strong LME lead and positive domestic lead ingot destocking, SHFE lead started strong and touched 17,165 yuan/mt. However, with supply recovery expectations ahead, bulls lacked upward momentum. Subsequently, SHFE lead fluctuated between 17,100 and 17,140 yuan/mt, finally settling at 17,115 yuan/mt, up 0.44%. Its open interest reached 42,769 lots, an increase of 1,692 lots from the previous trading day.

On the macro front:

On October 9, the Ministry of Commerce, together with the General Administration of Customs, issued an announcement on export control measures for items related to ultra-hard materials, rare earth equipment and raw/auxiliary materials, 5 types of medium-heavy rare earths including holmium, lithium batteries, and artificial graphite anode materials, which will be officially implemented on November 8. US government shutdown dilemma persists: the Senate rejected the funding bill seven times, Trump threatened to cut Democratic projects, and the Republican leader denied resorting to "major moves".

Spot market: In the lead spot market yesterday, the first day after the National Day holiday, SHFE lead held up well. However, a few suppliers were still on holiday, resulting in scarce market quotations. Quotations in the Jiangsu, Zhejiang, Shanghai area were at parity against either the SHFE lead 2510 or 2511 contract. Meanwhile, quotations for primary lead cargoes self-picked up from the production site increased compared to pre-holiday, but quotation discrepancies were significant. Mainstream origin quotations against the SMM #1 lead average price were at discounts of 20 yuan/mt to premiums of 150 yuan/mt ex-works. Secondary lead smelters also mostly refused to budge on prices while selling. Secondary refined lead quotations against the SMM #1 lead average price were at discounts of 100 yuan/mt to premiums of 50 yuan/mt ex-works. Downstream enterprises still had some lead ingot inventories, inquiries were few, wait-and-see sentiment was relatively strong, and trading in the spot order market was sluggish.

Inventory: As of October 9, LME lead inventory increased by 1,375 mt to 237,450 mt; the total SMM lead ingot social inventory across five areas stood at 36,900 mt, a decrease of 9,500 mt from September 25 and a decrease of 5,200 mt from September 29.

Today's lead price forecast:

Before the holiday, as lead smelters were generally in a state of production cuts or halts, coupled with downstream stockpiling bringing consumption forward, downstream enterprises picked up goods during the National Day holiday. Consequently, post-holiday lead ingot social inventory decreased instead of increasing, falling to the lowest level since September 5, 2024, supporting lead prices to fluctuate at highs. Additionally, with fewer than four trading days remaining until the delivery of the SHFE lead 2510 contract, attention should be paid to the possibility of an increase in visible lead inventory due to the transfer of delivery brand lead ingots to delivery warehouses, as well as the expectation that secondary lead smelters will resume production in mid-to-late October.

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, and are for reference only, not constituting decision-making advice.