SHANGHAI, Nov 26 (SMM) – The most liquid SHFE lead contract is likely to see limited downside room in December, with significant support from tight supplies of lead concentrate, high battery scrap prices and low social inventories, SMM believes. Social inventories, at a low in close to six years, provided the most support. 

In the past two months, SHFE lead hovered in the range of 18,000-19,000 yuan/mt as supply and demand held relatively stable.

In December, inclement weather might force northern miners at high altitudes to cut or even suspend production. This, together with the ongoing winter stockpiling across smelters, is set to further tighten supplies of lead concentrate across Chinese markets. SMM learned that concentrate shortages kept some smelters in Hunan from operating at full capacity last week, with the average operating rate across primary lead smelters across the region down 3.3 percentage points in the week through November 23.

Prices of battery scrap are more likely to rise than fall. SMM calculations showed that costs for secondary lead production stood at 18,000-18,200 yuan/mt as of Monday November 26.