Lead prices may remain rangebound at high levels

This week the Federal Reserve will announce its interest rate decision and a summary of economic expectations. The CME Group Fed Watch Tool shows that the probability of the Federal Reserve keeping interest rates unchanged in March is as high as 99%. Other economic data due this week mainly includes the final annualised CPI in the eurozone in February, the annualised total housing starts in the United States in February, and the annualised total existing home sales in the United States in February.

LME lead inventories fell slightly after rising and stood at 190,950 mt as of March 14. The contango of LME cash to the three-month contract stood at $6.26/mt as of March 14. The recent prominent geopolitical conflicts and the pace of interest rate cuts by the Federal Reserve have pushed the price of gold to record highs. Meanwhile, LME lead prices also rose to a one-and-a-half-month high. LME lead is expected to trade between $2,100-2,195/mt this week.

In terms of SHFE lead, the delivery of the SHFE front-month contract caused the social inventory of lead ingots to continue to rise. However, primary lead smelters plan to undertake maintenance, and the supply of lead ingots has tightened. In addition, inventories at smelters have declined, and the spot discounts turned into premiums (against the average price of SMM #1 lead), pushing up lead prices. The State Council issued the "Action Plan for Promoting Large-Scale Equipment Updates and Trade-in of Consumer Goods" on March 13 to promote consumption. Meanwhile, the rise in lead prices has restored the profits of secondary lead, which may stimulate production at smelters and make up for the primary lead output reduction. The most traded SHFE lead contract is expected to trade between 16,050-16,400 yuan/mt.

Spot prices are expected to move between 15,950-16,250 yuan/mt. In terms of primary lead, an increased number of smelters implemented maintenance, and the supply of lead ingots has been reduced. In addition, inventories at smelters are low. Spot cargoes under small orders will be sold with small premiums. In terms of secondary lead, the supply of battery scrap has been slightly ample recently, and secondary lead smelters have returned to profitability. Secondary lead has gradually been sold with discounts, and the discounts will continue to expand. In terms of lead consumption, the production of lead-acid battery companies is stable, but the price of lead is high. Most companies mainly purchased under long-term orders and are more cautious in purchasing under small orders at high prices.