Lead Price May Increase More Slowly This Week Amid Low Inventory and High Profits

SHANGHAI, Nov 29 (SMM) - This week, US will release the unemployment rate in November, seasonally-adjusted non-farm payrolls, ADP employment data, initial jobless claims in the week ended November 27, and the final value of the US Markit manufacturing and service industry PMIs in November. China will release the official manufacturing PMI and Caixin service industry PMI in November. Most readings are expected to be positive. The focus will also be put on the US Fed Beige Book on economic conditions and its guidance on interest rate hikes.

The lead stocks across LME-listed warehouses fell slightly as the SHFE lead cruised higher and the consumption in Southeast Asia improved. LME lead rose from a high level, and the LME cash to the three-month lead contract turned from Contango to Backwardation again. The lead ingot exports from China are expected to remain high in October, which may narrow the overseas supply gap. LME lead is expected to rise more slowly and trade between $2,200-2,290/mt.

SHFE lead rose strongly to near 15,500 yuan/mt as the large secondary lead smelters conducted maintenance, the smelters in Henan started maintenance for environmental protection reasons, and Henan and Hebei initiated air pollution emergency response. The lead ingot inventory fell more significantly last week, which may continue to support the lead prices to move at high levels. However, the secondary lead smelters may resume the production driven by high profits, which is likely to suppress the prices. The most traded SHFE lead contract is expected to trade between 15,000-15,450 yuan/mt this week.

The spot prices are expected to move between 15,000-15,350 yuan/mt this week. Some primary lead smelter will complete the maintenance this week, and the regional supply shortage may be alleviated. However, the smelters are expected to continue to hold prices high amid low inventories. The secondary lead smelters shipped goods actively as the lead prices rebounded, and the quotations for secondary lead stood at discounts. However, the supply will remain tight in some regions, where the spot prices may stand high. The consumption in lead-acid battery market was moderate. The battery companies will mostly maintain high operating rates in December amid high export demand, and they will purchase lead ingot on demand this week. However, some companies may refuse to accept the high prices after the deliveries of a new round of long-term orders start.