The continuous decline in lead futures causes cautious downstream observation, while inventory holders transfer stocks, leading to a significant increase in social inventory [SMM Lead Morning Comment]

Overnight, LME lead opened at $1,965.5/mt. It fluctuated downward during the Asian session, rose to a high of $1,979/mt in the European session before dropping to a low of $1,946/mt, and finally rebounded slightly before the close, closing at $1,958/mt, down $12/mt, or 0.61%.

Overnight, the most-traded SHFE lead 2410 contract opened at 16,475 yuan/mt. It initially dropped to a low of 16,280 yuan/mt before rebounding to stabilize above the daily moving average, ending at 16,355 yuan/mt, down 235 yuan/mt, or 1.42%.

Macro side, the latest non-farm payrolls data released last Friday were lower than expected. The US job market continued to cool down, but market traders lowered their expectations for significant rate cuts by the US Fed, with the US dollar index fluctuating upward. Fundamentals side, according to the survey, amid continuous drops in lead prices, inventory holders showed significant divergence in their selling strategies, with both holding prices firm, reluctance to sell, and dumping over fear of further decline coexisting. Meanwhile, this week is the week before the delivery of the SHFE lead 2409 contract, leading to increased inventory transfers to delivery warehouses by holders, causing a sharp rise in social inventory. Furthermore, the limited decline in battery scrap prices after the lead price drops has expanded losses in secondary refined lead, severely impacting the production enthusiasm of secondary lead smelters. Combined with the fulfillment of the maintenance expectations at the primary lead smelters in early September, the subsequent supply of circulating goods may change. It is expected that before delivery, downstream will mostly stay on the sidelines, consumption will remain mediocre, inventory holders will continue transferring stocks to delivery warehouses, and social inventory of lead ingots will likely keep rising.