Lead Prices Likely to Hit 16,000 yuan/mt in December

SHANGHAI, Dec 16 (SMM) - The lead prices showed a V-shaped trend in November. The secondary lead smelters were expected to resume the production amid high profits, which dragged down the most traded SHFE lead contract from 16,005 yuan/mt to 14,640 yuan/mt. However, the production resumption was weaker than expected, and the deliverable lead brands conducted maintenance intensively, which caused the lead social inventory to drop more significantly. Then the lead prices bottomed out and reached 15,500 yuan/mt as of November 30.

The maintenance at deliverable primary lead brands was gradually completed in early December, and the spread of COVID-19 variant Omicron triggered the outbreak of bearish sentiments in the market. The SHFE lead dropped below 15,000 yuan/mt again and hit the lowest point at 14,770 yuan/mt. The regional variance of secondary lead supply expanded due to the environmental protection and maintenance, and the social inventory continued to drop amid export expectations. The lead prices rebounded strongly to around 16,000 yuan/mt.

In mid to late December, the maintenance of primary lead smelters will be gradually completed, and some secondary lead smelters will also resume the production from environmental protection inspections and maintenance. The total supply of lead ingots will increase by about 20,000 mt, hence the social inventory of lead inventory may slow down.

On the consumer side, the production of lead-acid battery enterprises stand stable, but the enterprises may need to collect funds in late December, which may affect the purchases of lead ingot.

The fifth batch of the second round of central environmental protection inspections has been fully launched in December, and four inspection teams will stay in Heilongjiang, Guizhou, Shaanxi, and Ningxia for one month. The secondary lead production in Anhui, Jiangxi and other places is restricted under the inspection by the solid waste management centres. The high-polluting production activities in Beijing-Tianjin-Hebei region and surrounding areas may be controlled more strictly during the Beijing Winter Olympics, which is likely to push up the lead prices.

Besides, the electricity generation costs have increased due to the higher coal prices, and some regions have notified to raise the electricity prices starting from January 2022, which will push up the production costs of the enterprises from the lead industry chain.

The profits of secondary lead smelters increased amid surging lead prices, and the smelters increased the shipments. As of December 13, the quotations of secondary refined lead stood at a discount of 450 yuan/mt over the average price of SMM 1# lead (ex-factory). The downstream users may turned to purchase more secondary lead.

The COVID-19 pandemic recurred across the world, and the Christmas holiday is around the corner. The lead prices will be mainly affected by the domestic market. The SHFE lead may reach 16,000 yuan/mt in the short term amid falling social inventory, but the prices may pull back after surging as the enterprises are collecting funds. The spot prices may stand between 15,000-15,800 yuan/mt.