Lead Prices in Apr Are Expected to Rise First and Then Decline Due to Seasonal Factor, Pandemic and So On

SHANGHAI, Apr 8 (SMM): In March, the most-traded SHFE lead contract showed a “V-shaped" trend, which once jumped to 16465 yuan/mt on March 8, creating a new high since August 10, 2020 and then fell rapidly. As of March 31, the most traded SHFE lead contract quoted 15815 yuan/mt, with an increase of 1.48% in the month.

The spot prices had the same trend as futures prices. According to SMM prices, the average spot price of SMM 1# lead ingot was 15400 yuan/mt at the beginning of the year. After a "V-shaped" trend, it finally surged to a new high since October 27, 2021 on March 31, quoting 15625 yuan/mt.

In terms of fundamentals, the output of primary lead smelters gradually recovered and the operating rates increased significantly in March. According to SMM weekly report, as of March 25, the average operating rate of primary lead ralllied to 56.4%, 4.19% higher than the beginning of the month, while that of secondary lead significantly declined to 37.77%. The change was mainly caused by the new value-added tax for battery scraps, the disturbance of the pandemic and the routine maintenance of enterprises in March.

In terms of inventory, SMM data indicated that the social inventory of lead ingots across five major places rose first and then fell in March. As of March 28, the lead ingot inventory across five major places totalled 102400 mt, with a decrease of 4.12% or 4400 mt at the beginning of the month. It is worth mentioning that on March 11, the inventory once increased by more than 10000 mt, setting a new high in three months. This change is mainly due to the rising futures prices caused by the geopolitical conflict between Russia and Ukraine and the abnormal change of capital. The goods holders were accelerating the delivery due to the huge difference between spot and futures prices caused by the sharp discounts of spot prices, while the downstream enterprises in the spot market sidelined with risk aversion sentiments, so that the inventory surged. Later, the lead ingot inventory declined because the production and transportation was affected by the pandemic. Continuous attention should be paid to the impact of the pandemic on the lead industry chain.

On the downstream consumers side, in mid-March, the export of batteries improved significantly, stimulated by the rise of lead prices. The production of lead-acid battery enterprises had returned to the level before the Spring Festival. However, the terminal consumption became thinner because of the traditional seasonal low and the pandemic in March. In this case, the weekly operating rate decreased slightly in late March. Looking forward to April, according to the preliminary research of SMM, the supply of primary lead and secondary lead is expected to change little compared with March, which is mainly subject to the downstream consumers. It is expected that the operating rates on the consumption side will decline in April. One of the main reason is that the lead-acid battery market has entered into the traditional seasonal low. And another reason is the modest performance in battery replacement of e-bicycle and electric cars caused by the travel problems on the backdrop of resurging pandemic. Although export orders may have a good performance, it is not enough to offset the reduction of battery replacement. Besides, it is expected that the lead prices will increase first and then decrease due to the shortage of overseas energy, the high domestic battery scrap prices, and the rising cost of transportation.