Fundamentals Present Both Bullish and Bearish Factors, Lead Prices Await Macro Guidance Next Week [SMM Lead Market Weekly Forecast]

         Next week, key macroeconomic data to be released includes the final reading of the University of Michigan Consumer Sentiment Index for November and the final reading of the one-year inflation expectations for November in the US. This week's major event was the US House of Representatives passing a temporary government funding bill previously approved by the Senate, marking a decisive step towards ending the longest government shutdown in US history. Additionally, the US Fed will release the minutes of its monetary policy meeting next week.

For LME lead, overseas LME lead inventory saw a weekly increase of over 20,000 mt, and the Cash-3M contango widened to -24.26 $/mt. Under the influence of these two factors, LME lead ended its five-day winning streak after touching an eight-month high. Moreover, with significant divergence among US Fed officials on monetary policy, the US dollar index declined, while the end of the US government shutdown had a positive impact. It is expected that LME lead will fluctuate at highs, trading between $2,045-2,095/mt next week.

Regarding SHFE lead, the most-traded SHFE lead 2511 contract is about to enter delivery next week. The visible inventory increase due to shipping to delivery warehouses still exists, but this round of deliveries is lower than expected, and social inventory of lead ingots remains at a low level not seen in nearly a year. In November, upstream and downstream enterprises in the lead industry chain began negotiations on long-term contracts for lead concentrates and lead ingots. The main point of contention in these negotiations is the supply gap for raw materials such as lead concentrates, which may support lead prices to hold up well. As short-term delivery factors are removed, increased circulation in the spot market could lead to a relative pullback in lead price gains. It is expected that the most-traded SHFE lead contract will trade between 17,350-17,750 yuan/mt next week.

Spot price forecast: 17,350-17,550 yuan/mt. For primary lead, with the end of maintenance and delivery factors for delivery brand enterprises, it is anticipated that spot circulation will increase, and spot premiums (against SMM #1 lead price) transactions will gradually decrease. For secondary lead, with lead prices hovering at highs, profits for secondary lead producers are moderate. Although tax invoice issues keep the tax-inclusive price of secondary refined lead high, the actual circulation of lead ingots has increased, and it is expected that smelters holding prices firm during sales will decrease. On the consumption side, terminal consumption in the lead-acid battery market is average, and producers generally produce based on sales. Especially with lead prices remaining high, if batteries can successfully raise prices, it could support lead consumption; otherwise, it would be detrimental to the recovery of consumption.