Lead Price Trading Logic for Next Week: Environmental Protection? Weak Consumption? Macro?

Next week, there will be a lot of significant macro data, mainly including China's official manufacturing PMI for October, the US ADP employment for October, the US Q3 real GDP annualized quarterly rate (preliminary value), the US core PCE price index for September, the US unemployment rate for October, and the US seasonally adjusted non-farm payrolls for October. Meanwhile, we need to continue to monitor the economic data's impact on the US Fed's rate decision in November.

For LME lead, the destocking trend of overseas lead ingots remains unchanged, while the LME lead 0-3 contango narrows to -$33/mt. The fundamentals are relatively supportive, which may support lead prices to fluctuate upward. Additionally, we need to pay attention to the impact of next week's important economic data on market sentiment. Next week, LME lead is expected to operate in the range of $2,045-2,110/mt.

For domestic SHFE lead, lead ingot inventory first decreases and then increases, with no prominent fundamental contradictions. Battery scrap prices are more likely to rise than fall, and smelters stand firm on quotes. As of October 25, the premium of secondary refined lead over SMM 1# lead average price is 0-50 yuan/mt ex-factory in some regions, almost the same as the price of primary lead, which may support lead prices to continue fluctuating upward. The most-traded SHFE lead contract is expected to operate in the range of 16,550-17,100 yuan/mt next week.

Spot price forecast: 16,400-16,700 yuan/mt. Supply side, primary lead smelters' production is relatively stable, and inventory parity is not high. Smelters stand firm on quotes; battery scrap supply is limited, smelting profits are thin, and environmental protection impacts exist in Anhui, Hebei, and Henan. Next week, attention should be paid to the resumption progress of smelters. Lead consumption side, the seasonal consumption improvement in the lead-acid battery market is limited, and new long-term contracts start in November. Downstream enterprises maintain restock as needed, but spot order procurement may decrease.