Temporarily Tight Spot Market vs. Moderate Downstream Consumption: Lead Prices May Fluctuate Upward in the Short Term [SMM Lead Morning Comment]

Overnight, LME lead opened with a gap at $2,017.5/mt, fluctuated rangebound during the Asian session, dipped to $2,005/mt in the European session, then rebounded to $2,035.5/mt, and finally pulled back to close at $2,010/mt, down 0.62%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,220 yuan/mt, briefly touched a low of 17,195 yuan/mt at the beginning of the session, then fluctuated around 17,240 yuan/mt, and finally closed at 17,235 yuan/mt, up 0.26%, marking a four-day winning streak.

Macro side, the US Fed meeting minutes indicated that officials lean towards a gradual approach to future interest rate cuts; some officials mentioned persistently high inflation and a weak labour market as reasons for potentially pausing or accelerating easing respectively; future considerations include lowering the overnight reverse repo rate by 5 basis points to align it with the lower bound of the federal funds rate. China's Ministry of Finance reported that from January to October, the total operating revenue of state-owned and state-controlled enterprises nationwide increased by 0.9% YoY, while total profits decreased by 1.1% YoY.

Fundamentals: entering winter, frequent occurrences of smog, heavy snow, and frost in north China, along with issues related to environmental protection-related controls and vehicle transportation, may severely impact the production of secondary lead in major production areas such as Anhui, Hebei, and Inner Mongolia. Additionally, recent new maintenance plans at primary lead smelting enterprises have led to a temporary tightness in spot market supply. Currently, consumption of two-wheeled electric bicycles has entered the off-season, while consumption of automobiles and some three-wheeled electric vehicles remains moderate. Some lead-acid battery producers may reduce production in December, but the actual impact remains to be seen. Overall, lead prices may continue to fluctuate upward in the short term.