Lead inventories in London Metal Exchange (LME) approved warehouses have surged by 49% over two days, reaching their highest level since March 2013, according to recent LME data. This increase is attributed to inflows of 91,025 metric tons, likely from parties delivering against short or bearish positions ahead of the November contract expiry.
Data reveals that two parties hold significant short positions for November—one accounting for over 40% of market open interest and another for 10%-19%. Conversely, four long positions exist, with one party holding up to 19% of open interest and the others between 5-9% each.
If short positions are not settled by delivering physical material upon expiry, the need to buy back positions can result in sharp price increases, particularly when available stocks are limited. Currently, LME total lead inventories consist primarily of on-warrant stocks, with only 3% marked for upcoming delivery.
Most of the new stocks are concentrated in Singapore, where a new LME warehouse was registered recently. Alastair Munro from broker Marex noted that the influx is likely finance-related, given the recent developments in Singapore.
As for market pricing, the discount, or contango, for cash lead against the three-month contract was reported at $39 on Tuesday, nearing a two-week high compared to $36 per ton at Monday’s close. The LME benchmark three-month lead contract rose by 0.7% to $2,002.5 per ton on Tuesday.