Lead Prices to Remain Rangebound Affected by Inventory and Costs

SHANGHAI, Aug 31 (SMM) - US will release the ADP non-farm payrolls and unemployment data in August, which are expected to be positive. SMM will also pay attention to the speech of Raphael Bostic, the chairman of FOMC voting committee and Atlanta Federal Reserve. Fed may give hawkish statement on reducing QE amid the positive economic expectations.

China will release manufacturing PMI for August, which is expected to decline. If lead stocks across LME listed warehouses continue to decrease this week, LME lead may break through the Bollinger Middle Rail. However, there remain a lot of uncertain factors in face of the pandemic and international situations, and the key factor for the breakthrough has not appeared. Secondary lead supply is expected to increase in the domestic market. More lead ingots are expected to be exported amid lower SHFE/LME price ratio, but the export volumed may be limited by the impeded shipping, thus the inventories of lead ingot will continue to increase. The supply of lead-acid battery scrap is tight. The prices of secondary lead stand around the break-even point. Lead prices will be affected by the inventory and costs. LME lead is expected to move between $2,265-2,335/mt, and the most traded SHFE lead futures contract is expected to move between 15,250-15,600 yuan/mt.

The spot prices are expected to move between 15,100-15,400 yuan/mt this week. The output of primary lead will increase as the power curtailment has been lifted in Henan and Hunan. If lead prices continue to rebound, the premiums of small orders may drop. New environmental protection inspections have been launched, while new production capacities will be put into operation this week. Most secondary lead smelters have little profits due to the tight supply of battery scrap, and they will still ship goods at the prices around the break-even point. Therefore, the discounts of secondary lead will expand if lead prices rise. The consumption in the lead-acid battery market stands stable, and the purchases of lead ingot are mainly for the long-term orders in September.