Supply Declines in Some Regions, Lead Prices Continue to Consolidate [SMM Lead Morning Meeting Minutes]

Futures:

Overnight, LME lead opened at $1,983.5/mt. During the Asian session, it moved sideways around the daily moving average, touching a high of $1,990.5/mt. Upon entering the European session, it fluctuated downward, probing a low of $1,963/mt. It saw a slight rebound just before closing, ultimately settling at $1,971.5/mt, down $14.5/mt or 0.73%. Overnight, the most-traded SHFE lead 2511 contract opened lower at 17,090 yuan/mt. It probed a low of 17,025 yuan/mt at the beginning of the session before rising to move sideways near the daily moving average. It then weakened slightly, ultimately settling at 17,045 yuan/mt, down 70 yuan/mt or 0.41%.

On the macro front: The Ministry of Commerce stated that it will work on releasing policy effects, promoting trade, and deepening trade cooperation, indicating continued policy support for foreign trade. Data released by the US Treasury on Thursday showed that the deficit for fiscal year 2025 was $1.78 trillion, down 2% from $1.82 trillion in fiscal year 2024. This was largely in line with the projection released by the Congressional Budget Office last week. Net tariff revenue for fiscal year 2025 reached $195 billion due to Trump's significant tariff increases.

Spot Fundamentals:

In the Shanghai market, Chihong and Honglu lead were quoted at a discount of 20-0 yuan/mt against the SHFE lead 2511 contract. SHFE lead hovered at highs, with some spot cargoes flowing into the spot market in Jiangsu, Zhejiang, and Shanghai. Offers were slightly higher than yesterday. However, supply of primary lead cargoes self-picked up from production site was tight, especially in north China where spot offers were scarce and quotes were firm, while the situation was relatively loose in south-west China. Meanwhile, secondary lead smelters sold cargoes following the market trend. Downstream enterprises primarily made purchases based on long-term contracts, with a few spot buys for urgent needs also accepting high-priced spot cargoes.

Inventory: As of October 16, LME lead inventory decreased by 2,775 mt to 252,000 mt, with the decrease mainly from Singapore warehouses. As of October 16, the total social inventory of lead ingots in five regions surveyed by SMM reached 37,700 mt, an increase of about 800 mt from October 9 and an increase of 1,700 mt from October 13.

Today's Lead Price Forecast:

On the supply side, primary lead smelters in north China were under maintenance recently. Coupled with downstream enterprises resuming normal production after the holiday, lead ingot consumption was better than expected, leading to a decrease in smelters' in-factory inventory. Social inventory of lead ingots rose as expected this week, as the delivery of the SHFE lead 2510 contract prompted suppliers to transfer inventory to delivery warehouses, converting smelter inventory into visible inventory. However, the volume of inventory transferred by suppliers in this delivery round was relatively limited, resulting in only a slight accumulation in lead ingot social inventory. Additionally, the raw material inventory for refined lead was moderate and could maintain supply. In late October, attention should still be paid to the cost support provided by scrap battery and lead concentrate raw material prices for the bottom of lead prices.