Lead prices to consolidate at high levels

On Monday May 27, the LME closed for the Spring Bank Holiday. Key macroeconomic data include the revised US Q1 real GDP annualised rate, the annualised US April core PCE price index, the eurozone April unemployment rate, and China's May official manufacturing PMI. Additionally, market focus will be on the US Fed's Beige Book on economic conditions.

For LME lead, there was a continuous decline in LME lead inventories in May, with a cumulative drop of 73,600 mt, including a 14,100 mt decrease last week. LME lead surged to $2,359/mt during the week, hitting a new high since April 26, 2022, driven by the inventory reduction. Meanwhile, the market expected that a Fed rate cut would be postponed, and the US dollar index rebounded from a low, causing base metals prices to retreat. This week, if the US dollar strengthens again, LME lead may shift lower, expected to trade between $2,235-2,335/mt.

Since May, SHFE lead prices have outperformed LME lead prices, opening the import window for lead concentrate and even for lead ingots at times. With the supplement of imported lead concentrate, domestic raw material supply pressure eased. Additionally, as lead prices fell, battery scrap traders sold off due to fear of further price declines, easing raw material supply tightness. The focus will be on when the easing of raw material supply will affect the ingot output. If lead prices continue to fall, downstream procurement may improve, limiting the downside space for lead prices. This week, the most-traded SHFE lead contract is expected to trade between 18,200-18,700 yuan/mt.

Spot price forecast: 18,050-18,450 yuan/mt. For primary lead, smelters’ production changed little and they may raise prices for shipments this week. For secondary lead, increased arrivals of scrap will boost smelters’ production enthusiasm, increasing available supply and expanding the discounts for secondary refined lead. In terms of lead consumption, downstream companies mainly restock as needed, and if lead prices fall again, buying on dips may emerge.

According to the SMM model, the average price range for SMM #1 lead ingot is [17,725, 18,575], the extreme price range is [17,280, 18,940], the normal price range is [17,580, 18,700], and the conservative price range is [17,870, 18,450]; the support range is [17,580, 17,870], and the resistance range is [18,450, 18,700].

The model predicts the price range for the most-traded lead contract closing price to be [18,180, 19,050], the extreme price range is [17,810, 19,340], the normal price range is [18,060, 19,150], and the conservative price range is [18,300, 18,950]; the support range is [18,060, 18,300], and the resistance range is [18,950, 19,150].