The Shanghai Futures Exchange lead market remained closed during China's National Day holiday, while London Metal Exchange lead prices experienced notable volatility driven by shifting macroeconomic conditions and US employment data surprises. During the holiday period, LME lead initially declined from $1,871.5/mt on September 30 to $1,860/mt on October 1, marking its lowest level since mid-July. Following the release of US nonfarm payroll data on October 2, prices stabilised at approximately $1,853.5/mt.
Upon market resumption on October 5, LME lead rebounded strongly to $1,869.5/mt and continued climbing to $1,871.5/mt on October 6. During Asian trading on October 7, the contract opened at $1,874.5/mt and subsequently rose to $1,881.5/mt as of 18:00 Beijing time, recording a marginal overall decline of 0.5% during the holiday period, according to Shanghai Metals Market analysis. The price movements reflected broader macroeconomic shifts.
Strong US economic data released at the end of September, including a multi-year high in PMI readings coupled with hawkish Federal Reserve commentary, initially pushed the market-implied probability of an October rate hike to 70-80%. This sentiment strengthened the US dollar to a 17-month high and elevated Treasury yields, with the five-year yield climbing above 5% for the first time since 2007 and the ten-year yield reaching 5.344%, its highest level since 2002. Base metals weakened broadly under combined pressure from a stronger dollar and rising yields.
Sentiment reversed dramatically following the October 2 US employment report, which delivered significant downside surprises. The US economy added only 29,000 jobs in September, representing less than one-third of market expectations. The previous month's reading was revised downward from 162,000 to 133,000, while July was revised to show a contraction of 10,000.
The unemployment rate rose to 4.2%, while average hourly earnings increased by only 0.1% month on month. Following this weak data, the implied probability of an October rate hike plunged from 70-80% to 15-28%, allowing LME lead and other base metals to rebound substantially on October 5. LME lead inventory dynamics presented a mixed picture.
Headline inventories declined from 356,600 mt on September 30 to 349,400 mt on October 6, a decrease of 7,200 mt. However, cancelled warrants increased by approximately 8,600 mt on October 6, raising the cancelled-warrant ratio to 10.3%, while off-warrant stocks rose from 77,500 mt to 86,300 mt, representing a net increase of 8,800 mt. The Shanghai Metals Market analysis noted that much of the metal under cancelled warrants has not actually left the warehouse system but has merely shifted from registered to off-warrant inventory.
Given the currently elevated absolute level of LME stocks, the headline inventory decline is considered insufficient to support expectations of tightening overseas supply. The Cash-to-three-month contango widened from $36.49/mt on September 30 to $40.91/mt on October 6, further confirming that the overseas market is not currently experiencing a physical shortage. On the positioning front, the LME Commitment of Traders report published on October 6 showed that investment funds reduced long positions by approximately 4,600 lots and added roughly 7,000 lots of short positions during the week ended October 2, contributing to the price decline.
Funds shifted into a net-short position in LME lead, with their net-long position as a percentage of open interest falling from minus 8.22% in the previous week to minus 12.42%. China's domestic fundamentals showed mixed signals heading into October. Primary lead smelters in central and northern China resumed operations in late September following maintenance, though production remained unstable during the initial restart phase, leaving room for further output growth once operations stabilise.
In the secondary lead market, some producers planned output reductions during the National Day holiday, potentially resulting in slight declines in operating rates. Demand weakened temporarily during the holiday period following completion of pre-holiday stockpiling. The combined weekly operating rate of lead-acid battery producers across five major provinces fell by 13.98 percentage points week on week between September 25 and October 1.
Lead-acid battery producers had already completed their pre-holiday restocking of lead ingots, with spot-market transactions weakening further. Some distributors planned promotional sales during the National Day holiday, suggesting that downstream consumers are likely to prioritise drawing down their own inventories in the early post-holiday period, resulting in relatively slow recovery in purchasing demand. Inventory levels at domestic smelters remained relatively low following active preselling of October cargoes and pre-holiday deliveries to downstream buyers.
Shanghai Metals Market social inventories of lead ingots across five major regions declined by approximately 9,200 mt during the final week before the National Day holiday, falling to 48,600 mt as of September 30. Although some inventory accumulation is expected after the holiday, the upside is likely to remain limited. Looking ahead, external uncertainty surrounding the lead market remains elevated.
While the unexpectedly weak September nonfarm payroll report sharply reduced the probability of an October rate hike and prompted the LME lead rebound on October 5, the market has not completely abandoned expectations of a December rate hike, with approximately 60% probability still priced in. The US dollar index and Treasury yields remain at elevated levels, leaving overseas markets under continued pressure and limiting the upside of the LME lead rebound. Key macroeconomic events to monitor include the University of Michigan Surveys of Consumers scheduled for Friday, October 9, and the release of September US CPI data on October 14, which will test whether the cooling labour market can meaningfully alter inflation expectations.
As macroeconomic pressure previously pushed overseas prices lower, China's lead import window has reopened, and market participants should closely monitor the pace at which overseas lead ingots are transferred into the Chinese market after the holiday. Domestically, the expected increase in primary lead production and arrivals of imported lead are likely to result in some accumulation of lead ingot inventories, placing downward pressure on prices. However, the current domestic inventory base remains low.
The Shanghai Metals Market analysis projects that the lead price trading range may widen after the holiday, with prices likely to remain volatile at elevated levels initially before coming under pressure as the expected increase in supply is gradually realised. Source: Shanghai Metals Market analysis dated October 7, 2026.
Source: news.metal.com