SHANGHAI, May 5(SMM) - The most-traded SHFE lead contract closed at 15,695 yuan/mt at the end of April, down 45 yuan/mt or 0.29% from the beginning of April.

The average price of SMM 1# lead was 15,450 yuan/mt as of April 29, a decrease of 25 yuan/mt or 0.16% from the beginning of the month.

Fundamentally, the overall operating rates of primary lead smelters moved in a downward trend in April. The operating rates fell slightly at the beginning of the month affected by the pandemic prevention and control and maintenance of smelters. As the supply of raw material recovered in some areas at the end of April, the operating rates still dropped with the maintenance of smelters in the Hunan. As of April 29, SMM weekly operating rates of primary lead fell 3.26 percentage points from the beginning of the month.

Unlike the flat operating rates of primary lead, the operating rates of secondary lead fluctuated. According to SMM weekly operating rates of secondary lead, it was on a downward trend until April 15 and hit a low since March 2020 on April 15. It was dragged down by the impact of the pandemic in some areas in early April, and transport restrictions led to difficulties in sourcing raw materials. At the end of the month, as the secondary lead smelters resumed production and the tight supply of raw materials eased, while the production of secondary lead smelters recovered, the operating rates rose after falling.

In terms of inventory, according to SMM data, social inventory of lead ingot across five major markets increased and then fell in April, with overall reduction in inventory. As of April 29, total inventory of lead ingots in five markets was 94,800 mt, a decrease of 4,600 mt or 4.63% from the beginning of April. In the middle and early April, because lead-acid battery entered the off-season after the Qingming Festival, purchases from downstream decreased. The declining rates of lead ingot consumption were higher than the supply under the pandemic, while the cargoes arrived in warehouses, resulting in the rise of social inventory. Social inventory fell after the end of the delivery in the middle of the month. With maintenance in primary lead smelters and export expectations, social inventory of lead ingot fell by nearly 10,000 mt.

At the end of the month, inventory of lead ingot continued to drop as the maintenance at the delivery brand smelters increased and downstream enterprises restocked on demand for the May Day holiday. SMM expects that social inventory of lead ingot may rise after the holiday because most enterprises took off. SMM will update the latest inventory data after the May Day holiday.

On the downstream consumption side, the operating rates of lead-acid battery fell significantly in April as it entered the off-season for lead-acid battery consumption. As of April 29, SMM weekly operating rates of lead-acid battery fell 8.52 percentage points to 63.44% from the beginning of the month. It is worth mentioning that in early April, in the case of the pandemic control and the production reduction during off-season, the operating rates of lead battery once dropped by more than 10%. At the end of the month, the second round of environmental protection supervision started and operating rates of lead-acid battery hovered at a low level.

In May, on the supply side, maintenance of primary lead smelters increased and the bulk order sources of primary lead were tight. Although some of the secondary lead smelters have maintenance plans, the production of secondary lead was still in recovery boosted by profits, and the supply may rise. However, the high prices of lead-acid battery scrap and the imbalance in the geographical supply of lead concentrate under the pandemic are expected to provide cost support for lead prices. On the demand side, orders in downstream battery factory were modest with thin consumption in off-season. In general, lead prices moved in rangebound, which may fluctuate in the short term affecting by macro factors.