2021 lead prices fluctuate upward in the first quarter of 2022 is expected to show a trend of high before and low after [annual review]

SMM survey: what kind of metal do you like most in 2022?

SMM December 31st: with New Year's Day's holiday approaching, 2021 officially came to an end. Looking back over the past year, lead prices have experienced both steady sideways swings and a strong rebound after a Waterloo-like fall and a probe into lows. Overall, lead prices have continued the volatile upward trend since March 2020 in 2021, but the trend of lead prices is slightly weaker than that of other strong peripheral metals. By the end of daytime trading on December 31, lead in Shanghai had been trading at 15300 yuan per ton, up 1.69 percent from the beginning of the year.

The trend of spot prices in 2021 is naturally consistent with the trend of futures. According to the spot price of SMM, as of December 31, the average price of SMM lead ingots was 15175 yuan per ton, up 425 yuan per ton from the beginning of the year, or 2.88 percent.

"Click to view the price of SMM lead products

Looking back at the lead market in 2021, in terms of primary lead, primary lead production increased year on year in 2021. From January to November, SMM primary lead production was 2.916 million tons, an increase of 2.9% over the same period last year. SMM expects primary lead production to increase steadily in 2022.

In terms of lead ingot exports, in the first half of 2021, although the situation of external strength and internal weakness was very favorable for exports, domestic lead ingot exports were expected to be delayed due to shipping problems disturbed by the epidemic, and did not begin to rise to the 10,000-ton level until September. Near the end of the year, with the stabilization of sea freight and the gradual recovery of container supply, lead ingot exports gradually increased significantly. SMM predicts that lead ingot exports may continue to grow in 2022 against the backdrop of the establishment of the Hu-Lun ratio and other export conditions.

In terms of recycled lead, according to SMM research, from January to November 2021, domestic production of recycled lead was 3.6789 million tons, an increase of 55.01% over the same period in 2020. The sharp increase in output was partly due to the release of the production capacity of the new recycled lead smelter during the year, and partly from the increase in production after the equipment of the newly expanded recycled lead plant was stable in the previous two years.

Downstream consumer side, according to SMM statistics, the national lead-acid battery production continued to increase in 2021, but the growth rate has slowed down significantly. According to the survey of SMM, the overall operating rate of lead-acid battery enterprises in China from January to November in 2021 is higher than that in the same period in 2020. At the same time, the domestic sales of lead-acid batteries also rose moderately, while the export business of lead-acid batteries rose rapidly. Only 178 million batteries were exported from January to November 2021, an increase of 17.3% over the same period last year. Among them, the proportion of automotive batteries increased significantly, an increase of 36.9% over the same period last year.

In terms of inventory, according to SMM data, SMM lead ingot stocks in the five places totaled 100200 tons as of December 27, a significant increase of 70.12% compared with 41300 tons at the beginning of the year. It is worth mentioning that the domestic social inventory of lead ingots once reached an 8-year high in 2021 and increased to 216000 tons on September 24th. With the effectiveness of the domestic epidemic prevention policy in 2021, the domestic lead ingot market shows a trend of double increase in supply and demand, but the recovery at the supply side is significantly faster than the increase in demand, which leads to the emergence of lead ingot accumulation bank to a certain extent.

Data source: SMM database

Prospect of lead City in 2022

For the future trend of lead prices, SMM believes that from the perspective of the first quarter, the operation of lead prices should pay attention to the changes in market inventory before and after the Spring Festival, and it is expected that the changes in inventory during the Spring Festival in 2022 may be similar to those in 2019, that is, they will be removed before the festival and accumulated after the festival. The reason for going to the warehouse before the festival is that in January 2022, due to the energy shortage in Europe, the possibility of production restrictions in the domestic Winter Olympic Games, as well as the epidemic situation and other factors, the supply of lead ingots recovered slowly, and the risk of lead ingot accumulation was small. During the Spring Festival, due to the increase in new enterprises for recycled lead, and most of them are large refineries, according to SMM preliminary research, the number of refinery shift production enterprises during the Spring Festival is expected to rise compared with last year, while downstream enterprises have more Spring Festival holiday plans, so the probability of accumulating storage during the Spring Festival is higher, following March according to the consumption cycle, will enter the traditional off-season. Generally speaking, the lead price is expected to show a trend of high before and low after, running in the range of 14600-15800 yuan / ton.

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Institutional review

As for the trend of the lead market in 2022, many institutions have predicted it one after another.

Fitch, a market analyst, said in its latest industry report that average global commodity prices are expected to fall from current levels in 2022 and that most commodity prices are expected to fall year-on-year as supply is expected to improve and demand growth slows. However, with macroeconomic support and low inventories, commodity prices will remain at record highs. Among the metal plates, Fitch expects iron ore, steel and zinc to fall the most, followed by aluminum, gold, nickel, copper and lead.

Gurumurthy K, chief research analyst at Business Line: it is expected that zinc and lead prices may rise temporarily in 2022.

Citic Securities: the excess supply of refined lead has narrowed in recent years, and it is expected that there will still be a global surplus of refined lead in 2022, but it will be significantly lower than in 2021. In the short term, strong overseas consumption can boost lead ingot demand and support lead prices, but in the medium to long term, the trend of lithium battery substitution is irreversible. We expect the average price of lead in Shanghai to fall to 14000 in 2022, and the fluctuation range of lead in Shanghai is estimated to be 1.25-15500.

In addition, SMM has another article documenting the major events in the lead and zinc market in 2021. For details, please click here to see the original article:

Limit electricity, reduce production and dump storage. How much do you know about the events that triggered the turmoil in the lead and zinc market in 2021? [annual Review]