Lead prices to continue to fluctuate at high levels

Key economic data due this week includes the flash eurozone manufacturing PMI in May, the final University of Michigan consumer confidence index in May in the United States, and the one-year inflation rate expectation in the United States in May. The Federal Reserve’s meeting minutes will be a focus of markets.

In terms of LME lead, since May, LME lead inventories have been declining, with a cumulative decline of 54,900 mt. Last week's inventory fell by 17,000 mt. Under the logic of destocking, LME lead prices once surged to $2,301/mt, setting a new high in nearly six months. The contango of LME cash to the three-month contract is showing an expanding trend. Last week, the contango fell to over $50/mt, and was reported at $52.92/mt as of May 16. The destocking (actually inventory transfer), coupled with the support of tight supply of lead concentrate, should keep LME lead prices fluctuating strongly. But according to the technical indicators, there is pressure on the $2,300/mt mark, so be alert to the risk of price falling. LME lead is expected to run between $2,220-2,330/mt this week.

As for SHFE lead prices, the lingering tightness in the supply of raw materials such as battery scrap, coupled with the central environmental protection supervision, drove the supply of ingots to temporarily tighten, thus narrowing the price gap between secondary lead and primary lead. Meanwhile, the lead ingot import window was about to open, which to some extent cooled down the bulls. It is expected that before the import conditions are met, the lead price will continue to fluctuate strongly. If the import is realised, it will become a strong negative factor. The prices of most active SHFE lead contract are expected to stand between 18,400-19,200 yuan/mt.

The spot prices are expected to move between 18,150-18,600 yuan/mt. The supply of primary lead and secondary lead is limited. As the cost of battery scrap is rising rapidly, the price gap between secondary lead and primary lead has narrowed, and may continue to narrow this week. As for primary lead, the supply will flow back into the market after the delivery of the SHFE front-month contract, and the spot premium may fell. In terms of lead consumption, the off-season for lead-acid battery market continued, and downstream companies’ consumption of finished product inventory was limited. Raw lead purchases were generally based on demand.

According to the SMM model, the average price of SMM #1 lead ingots is expected to range from [17,230, 18,180] this week. The extreme price range is [16,630, 18,780], the normal price range is [17,030, 18,380], the conservative price range is [17,430, 17,980], the support range is [17,030, 17,430], and the pressure range is [17,980, 18,380].

The model predicts that the closing price of the most active SHFE lead contract will run in the range of [17,705, 18,895]. The extreme price range is [17,180, 19,340], the normal price range is [17,530, 19,040], the conservative price range is [17,880, 18,750], the support range is [17,530, 17,880], and the pressure range is [18,750, 19,040].