Destocking and economic measures may drive lead prices upward [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,097.5/mt. Benefiting from China's economic stimulus policy, LME lead showed a fluctuating upward trend throughout the day, peaking at $2,147.5/mt, the highest since July 19, 2024. By the close, the rise in LME lead slowed and LME lead closed at $2,137/mt, up 1.64%.

Overnight, the most-traded SHFE lead 2411 contract opened higher at 16,850 yuan/mt. With the release of domestic economic policies, non-ferrous metals generally strengthened. SHFE lead initially surged to 16,920 yuan/mt, a new high for the past half month. Subsequently, the rise in SHFE lead slightly retracted, and SHFE lead consolidated between 16,800-16,850 yuan/mt, finally closing at 16,795 yuan/mt, up 0.81%. The open interest was 46,057 lots, down 110 lots from the previous trading day.

Macro side, the Political Bureau of Central Committee of the Communist Party of China held a meeting to analyze the current economic situation and work. The meeting emphasized strengthening the counter-cyclical adjustment of fiscal and monetary policies, ensuring necessary fiscal expenditure and effectively securing the "three guarantees (Ensure basic livelihood, secure wages, maintain operations)" at the grassroots level. It aims to stabilize the real estate market, strictly control new construction, optimize existing stock, and improve quality, while increasing loans for "white list" projects and revitalizing idle land. Additionally, the PBoC implemented RRR cuts and interest rate cuts: from September 27, the reserve requirement ratio for financial institutions was lowered by 0.5 percentage points, and the 7-day reverse repo rate was reduced by 0.2 percentage points.

Fundamentally, before the National Day holiday, downstream enterprises' lead consumption expectations are gradually realized, leading to a significant drop in social inventory of lead ingots, supporting a fluctuating upward trend in lead prices. Recently, maintenance at some primary and secondary lead smelters has ended, and new capacity for lead ingot is about to be released. The expected increase in lead ingot production in October exceeds 30,000 mt. Coupled with the National Day holiday for downstream enterprises, there is a high risk of inventory accumulation in the lead ingot market after the holiday. Future attention should be paid to the resumption of primary and secondary lead enterprises and new capacity commissioning progress.