SHANGHAI, Oct 22 (SMM) – The most traded SHFE lead contract kept rising after hitting the lowest level since June 2020 at 14,055 yuan/mt on September 23. SHFE lead reached a nearly three-month high at 16,330 yuan/mt in the overnight trading on September 20. In the intraday trading on September 21, the most traded SHFE lead contract closed 1.5% higher at 15,945 yuan/mt, up 1,890 yuan/mt or 13.4% from September 23.
LME lead reached a new high since June 2018 at $2,447/mt on October 20, and the lead stocks across LME-listed warehouses increased by 275 mt to 57,000 mt on October 21. The spot prices of SMM #1 lead ingot averaged 15,825 yuan/mt as of October 21, up 10.7% from September 23.
Jiyuan issued another notice of the production cut by about 30% due to the power rationing, and some smelters have planned to reduce the production slightly, but the reduction is limited. The secondary lea output is expected to increase as the environmental protection has been eased and the rebounding lead prices restored the profits of the secondary lead. Anhui and Henan are still under the power rationing, which is likely to affect the supply of the primary and secondary lead in the short term.
The domestic lead ingot inventory has been increasing since end-April, and keeps hitting the record highs since 2014. However, the inventory declined slightly in end-September as the overall reduction in the supply of the primary lead, secondary lead, and lead-acid battery was more significant than that in the consumption due to the losses, power rationing, and the environmental protection inspections. Social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin totalled 193,900 mt as of October 19, down 22,100 mt or 11.4% from September 24.
SMM expects the coal and power shortage to extend in Q4, which may continue to affect the whole lead industry chain. In addition, the primary lead smelters will start intensive maintenance, which may slow down the inventory increase of lead ingots and support the lead prices. The lead prices in Q4 are expected to stand higher than that in Q3.
The downstream users are restocking on demand, and some lead-acid battery companies plan to ramp up the production in Q4. The consumption may grow further.
In the short term, the secondary lead smelters are willing to produce. Although the government’s control on the unreasonable rise in the coal prices has suppressed the ferrous and non-ferrous metals, the power rationing will continue to support the prices, and the lead prices are expected to stand high.
However, in the medium to long term, the new secondary lead capacities will be put into production, and the smelters production enthusiasm is high amid the high profits, which may cause the inventory pressure.
