SHANGHAI, Apr 11 (SMM) – Shanghai lead prices bucked their rangebound pattern and tumbled in recent days as pessimistic outlook on consumption and growing supply prompted traders to aggressively load up short positions.
The most active lead contract on the Shanghai Futures Exchange lost close to 3% during Wednesday-Thursday.
Weaker-than-expected lead-acid battery sales, the upcoming new standards for electric bikes and a traditional low season will affect demand for lead in April.
Lead-acid battery producers sharply lowered offers in March to promote sales. Prices of 48v12Ah, a typical type of lead-acid battery, fell 8.9% last month, down from 335 yuan/set at the start of the month to 305 yuan/set at the end of the month. This was a larger decline compared to a fall of 2.6% in prices of SMM 1# lead, suggesting poor demand for lead-acid batteries.
The new national guidelines for electric bikes would be another headwind against lead consumption.
The new standard, effective from mid-April, allows for heavier models and raises the maximum weight from 44 kg to 55kg. However, most existing models in the market are heavier than 55 kg, with some exceeding 70 kg. This forced electric bike producers to lighten their products, driving them to lithium-ion batteries, which are lighter than lead-acid batteries.
Growing supply further affected fundamentals. China’s production of primary lead gained 14.48% from February to stand at 257,700 mt in March, while output across secondary lead smelters production licences grew by about 65,000 mt last month, SMM data showed.
Operations across primary and secondary lead smelters hold stable in April, with no maintenance scheduled.
According to SMM data, lead social inventories gained 13%, or 4,700 mt month on month in March.
SMM believes that SHFE lead prices have yet to bottom out as secondary lead smelters continue to see profits. With electric bike battery scrap prices of 9,200-9,250 yuan/mt, costs at secondary refined lead smelters stood at 16,500-16,590 yuan/mt, lower than SMM 1# lead price of 16,625 yuan/mt as of Thursday April 11.
Lead prices are expected to regain some steam when price spreads between primary and secondary lead fall to zero and when lead social inventories shrink.
