SHANGHAI, Nov. 28 (SMM) - Lead prices, both home and abroad, have refreshed highs in recent days. LME lead grew $192 per tonne last Friday. SMM #1 lead price increased 1,200 yuan per tonne to 21,050-21,200 yuan per tonne on Monday, and average lead price was around 16,000 yuan per tonne in October.
What factors drive lead prices up?
“Positive fundamental is one major price driver behind surging lead prices, in addition to speculative funds and bullish sentiment,” SMM lead analyst says.
First, both supply of domestic and imported lead ore is tight, which can also be told from falling TCs of lead concentrate, SMM survey finds. Offers of TCs for domestic lead concentrate dropped below 1,000 yuan per tonne and those of imported lead concentrate fell to $30-40 per dry tonne, the record low level.
Second, lead supply is insufficient in China’s market.
Primary lead smelters produce only for term contracts with shortage of goods, and output at secondary lead smelters decline significantly due to new environmental protection inspections. To sum up, supply is extremely insufficient in China’s market, especially goods with bills.
Third, downstream demand is picking up.
The surge in lead price has pushed up battery prices and orders as well, Growing orders also help utilization rates at battery prices at highs. Strong buying interest has also reduced battery inventories down from a high level seen in H1 2016, also pushing up lead prices.