SHFE Lead is Expected to Rise, Social Inventory of Lead Ingot More than 100,000 mt

SHANGHAI, May 17(SMM) - Futures: LME lead ended 1.73% higher at $2,114/mt in the overnight trading after opening at $2,073/mt and moving in an upward trend due to the fall of US dollar index.  The most-traded SHFE lead 2206 contract ended 0.40% higher at 14,940 yuan/mt in the overnight trading. The open interest increased by 695 lots from the previous day to 56,410 lots.

Spot Fundamentals: In Shanghai market, Chihong and Tongguan quoted at premiums of 0-20 yuan/mt over SHFE lead 2206 contract, while in Jiangsu and Zhejiang market, Jijin, Jiangxi Copper, Tongguan and Nanfang lead quoted from discounts of 10 yuan/mt to premiums of 10 yuan/mt over SHFE lead 2206 contract. The lead futures rebounded and there was no big change in the quotations of the holders. SHFE Lead 2205 contract was delivered on May 16, with less available goods in the market, and some traders were interested in taking goods at low prices, and the downstream enterprises purchased on rigid demand, which animated the transactions in the bulk market. In terms of secondary refined lead, production costs at smelters were high. Secondary refined lead smelters were less willing to sell goods. Spot discounts of secondary refined lead(including tax) narrowed to 50-100 yuan/mt. Most smelters were unwilling to sell and downstream purchased on rigid demand, but the overall market transactions were thin. In terms of inventory, social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin stood at 108,600 mt, an increase of 11,000 mt from May 13 and 11,600 mt from May 9 as of April 16. Social inventory of lead ingots broke through 100,000 mt again after one month, and hit a new high within two months.

Lead price forecast: On the supply side, the supply of lead ingots slowly recovered, and the declining lead prices dragged down the shipment at secondary refined lead smelters with narrowed discounts. On the consumption side, the consumption of lead-acid batteries for automobiles and electric vehicles was still sluggish on the back of the pandemic and the operating rates declined slightly. Lead prices remained stable with the support of secondary lead costs and the increase of non-ferrous metal prices. The most-traded SHFE lead contract may move rangebound around 15,000 yuan/mt. It is expected that lead prices will increase by 0-50 yuan/mt from yesterday.