SHANGHAI, Aug (SMM) - SHFE lead fluctuated at high levels in July. As of July 30, the most traded SHFE lead contract closed at 15,860 yuan/mt, an increase of 0.9% during the month.
Spot quotations of SMM #1 lead ingot averaged 15,775 yuan/mt on July 30, up 225 yuan/mt or 1.4% from early July.
Lead ingot supply remained in surplus in July, and the overall operating rates of primary lead stood stable despite the power curtailment and other influence factors. The output of secondary refined lead increased over 30,000 mt after the profit restoration in July, which may cause the stock increase in August.
Domestic lead ingots kept rising since the end of April and continuously hit new record highs since 2014. Social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin totalled 172,600 mt as of July 30, up 110,000 mt or 175.7% from the end of April, hitting a record high since October 2014. SMM expects that the growth rate of ingot social inventories will slow down.
Downstream demand is growing slowly as the lead-acid battery industry has entered the peak season in July. Although many battery companies have not reached full production capacity, the expectation of peak season still exists.
The major inventory pressure in August will come from the new capacities of secondary lead and the production resumed from the maintenance. The rising consumption in the peak season may slow down the inventory increase.
The prices of most traded SHFE lead contracts are expected to stand between 15,650-16,500 yuan/mt in August. The impeded transportation due to the pandemic in Jiangsu and the power rationing in Henan are worth further attention.