Lead Prices Hold Firm on Tight Supplies

SHANGHAI, Aug. 14 (SMM) – China’s spot lead prices have been holding firm lately, rising for a sixth trading day in a row as of August 13 and gaining RMB 75/mt during the day to RMB 14,150-14,300/mt, according to data of Shanghai Metals Market (SMM). Tightening supply is mainly behind the rapid increase prices.

 

Shortages of crude lead and lead concentrate starting from mid-July, and persistently low lead prices resulted to an increasing number of lead smelters conducting maintenance in Hunan and Yunnan. Jingui Gold & Lead, Zhuzhou Smelter Group, and Guiyang Yinxing Nonferrous all reported contracting output due to maintenance. Although Jingui managed to resume operation in late July, the smelter only fulfilled long-term contracts. The resultant lead shortages in the Hunan market pushed up lead demand in its neighboring province Jiangxi. Thus, lead supply in both provinces fell short. 

 

In Henan, another large lead production base, smelters saw decline in operating rates, exacerbating the supply tightness. In late July, Luoyang Yongning Gold & Lead halted production for maintenance, while Zhicheng Gold & Lead remained suspended. Yuguang Gold & Lead and Yubei Gold & Lead, though reporting output growth, have yet to produce in full swing and primarily supplied goods under long-term contracts. Jinli Gold & Lead reduced production in early August, and Wanyang Lead may not be able to maintain normal production for some ten days as the heavy storms damaged its facilities. 

 

The average operating rate at major primary lead smelters dropped to 56.56% in July, according to the latest SMM survey, with raw material supplies for lead-acid battery producers negatively affected. With fewer lead ingots available for trading in spot markets and LME lead prices rising noticeably, spot lead prices in China climbed above RMB 14,000/mt, with SMM #1 lead price offered at RMB 14,150-14,300/mt on August 13. SHFE lead price increased along with LME lead, up RMB 450/mt or 3.3% during the six trading days ending August 13. 

 

Nevertheless, the fast price hikes ate into downstream buying interest, raising market expectation for a possibly pullback. That being said, tight supply for lead ingot will unlikely be eased for the foreseeable future, combined with the start of high demand season for electric vehicle batteries, lead prices may also find evident support.