Lead prices will return to fundamentals

The key data due this week include the US unseasonally adjusted annualised CPI in March, seasonally adjusted CPI in March, annualised PPI in March, and one-year inflation rate expectations in April. The minutes of the Federal Reserve's monetary policy meeting and overseas geopolitical risks will also be a market focus.

In terms of LME lead, the growth trend of LME lead stocks remained unchanged, reaching 273,400 mt as of April 2, a new high since March 14, 2013. Recent remarks by Federal Reserve officials that they are not in a hurry to cut interest rates have caused the US dollar index to rise and hit a nearly five-month high. Base metals prices are mostly under pressure and consolidate at lows. In addition, frequent geopolitical conflicts overseas are not conducive to economic recovery. Lead prices are expected to consolidate rangebound in the short term, with LME lead prices expected to run between $2,015-2,100/mt.

As for SHFE lead prices, in April, the supply and demand of lead ingots are expected to decline. Lead consumption will weaken on a month-on-month basis due to the traditional off-season; maintenance at smelters of delivery brands of primary lead will limit supply. After the Qingming Festival, if the inventory accumulation driven by the delivery of the SHFE front-month contract materialises, the lead price will continue to fall. If the price of lead falls as expected, attention will need to be paid to the cost support from lead concentrate and scrap. The most active SHFE lead contract prices are expected to stand between 16,150-16,600 yuan/mt this week.

The spot prices are expected to move between 16,000-16,350 yuan/mt. In terms of primary lead, maintenance and recovery at smelters both occurred. The regional supply differences of lead ingots are expected to widen, and as the delivery date approaches, the price gap between delivery and non-delivery brands will also widen. Delivery brands may continue to trade with premiums. In terms of secondary lead, the profit of secondary lead smelting is still acceptable, and smelters are actively shipping cargoes. As a few companies intend to carry out maintenance, the resultant regional supply differences may widen regional price gaps. In the short term, secondary lead will continue to be sold with discounts. In terms of lead consumption, after the Qingming Festival, lead procurement will resume on the back of production resumption at some downstream enterprises.