SHANGHAI, Jan 14 (SMM) - The SHFE lead fell sharply to 14,770 yuan/mt at the beginning of December as the market was expecting the secondary lead production to be resumed. Then the supply was expected to tighten amid the shortage of natural gas in Europe, which boosted the SHFE lead to the highest level at 15,870 yuan/mt. Later, the prices stayed rangebound on stable fundamentals.
Although the expectations of the lead supply recovery have intensified in January, the stocks of lead ingots are still falling amid downstream restocking before the CNY. The SHFE lead is expected to stand at 15,000-15,500 yuan/mt in January, and the spot premiums or discounts are likely to stand at around 200 yuan/mt. The supply and demand of lead ingots will be affected by the upcoming CNY in mid to late January.
The downstream lead-acid battery producers will gradually take holidays starting from January 20 for the CNY, and the non-local workers are eager to return to their home town. Since there are higher proportions of non-local workers in Jiangsu, Zhejiang, and Guangdong, the local battery producers may need to reduce their production since January 10. As such, the support from the demand side for lead prices may weaken.
On the supply side, most large-sized primary lead smelters will produce in shifts during the CNY holiday, and more secondary lead smelters, especially the smelters in Anhui, plan to produce in shifts during the CNY holiday compared with the previous year, which will weigh on the lead prices.
The worsening COVID-19 pandemic have impeded the logistics in Henan, Tianjin, and other regions, hindering the shipments from smelters. At the same time, the battery producers procured the lead ingots from nearby areas, which resulted in the increase in stocks across lead smelters and the decline in social inventory. The goods from the deliverable brands available in the market has declined.
The costs of secondary lead have increased as the prices of lead-acid battery scrap rose amid active restocking by smelters.
The lead prices are expected to move downward to 14,850-15,450 yuan/mt in mid to late January, while the cost support still exists. SMM will track the impact of overseas energy supply on lead prices after the CNY holiday.