- LME inventories drop by 5%, prices rise by 2%
- China’s social inventory falls to over 1-year low
The lead market experienced a week of strong upward momentum and notable price gains during Week 42, largely driven by significant destocking of LME inventories, improved downstream demand, and a firming SHFE market. This led to a positive closing despite some early-week volatility.
LME price trends
LME lead cash-settlement prices showed a strong uptrend throughout the week. Prices opened at $1,972.5/tonne (t) on 20 October and, after a brief dip, fluctuated upwards. The strong rise in SHFE lead boosted LME lead prices, which hit a high of $2,018/t towards the end of the session on 24 October, finally closing at $2,016.5/t. This closing price represented an impressive increase of 2.28% over the week.
The three-month LME lead contract mirrored this upward movement, with a price of $2,016.5/t as of 15:00 Beijing time on 24 October.
Inventory analysis
LME lead inventories saw a sharp decline during the week from the previously recorded six-week high. Stockpiles on the exchange slumped by over 7,000 t mid-week, reaching a one-and-a-half-week low. Overall, inventories fell from 247,300 t on 20 October to 235,375 t on 24 October, a decline of 4.8%.
This significant destocking, which also occurred in the Chinese market, provided strong support for prices. To illustrate, domestic lead social inventory in China dropped to a more than one-year low due to improved consumption and increased downstream procurement.
MCX trends (20-24 October)
MCX lead prices reflected the strong global gains and positive domestic cues. MCX lead futures for October expiry rose during the week, tracking the global upward trend. Prices closed at INR 177,200/t on 20 October and saw strong gains, reaching INR 179,050/t on 23 October before settling slightly lower at INR 178,950/t on 24 October. This represented a gain of 1.03% over 20-24 October.
The Indian market was supported by improved demand from battery manufacturers, overall positive sentiment from global markets, and a weakening dollar.
SHFE trends
SHFE lead prices experienced a significant rally during the week, driven by strong fundamentals. The most-traded SHFE lead 2512 contract opened at RMB 17,100/t and, after a period of consolidation, rallied to a high of RMB 17,660/t, finally closing at RMB 17,595/t on 24 October. This represented a substantial increase of 2.95% over the week. The rally was driven by improved consumption and increased downstream procurement enthusiasm, which led to a drop in domestic lead social inventory.
Outlook
The near-term lead outlook appears bullish, driven by the tightening inventories in both global and Chinese markets. The significant destocking observed during Week 42, coupled with improved downstream demand in China, suggests a better supply-demand balance. However, market participants will closely monitor the sustainability of this demand and potential shifts in macroeconomic sentiment.
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