Lead Prices Rose amid the Tight Supply but May Decline as the Consumption did not Recover

SHANGHAI, June 21 - Futures: LME lead opened at $2,056/mt and rose by 2.34% to $2,098/mt overnight, after hitting the lowest point of $2,042/mt and the highest point of $2,099.5/mt. During the Asian trading hours, affected by the SHFE lead, LME lead fluctuated between $2,050-2070/mt while in the European trading hours,  LME lead hit one-month low amid the increase of US dollar and then rose up due to the increase of SHFE lead. The most traded SHFE 2207 lead contract opened at 14,960 yuan/mt overnight and rose up to 15,195 yuan/mt as the lead ingot warrant inventories declined by 8,000 mt, and finally closed at 15,180 yuan/mt, up 1.71%. The open interest decreased by 5,454 lots from the previous trading day to 44,274 lots.

Spot fundamentals: In the lead spot market yesterday, the smelters held the prices firm amid the tight regional primary lead supply and the decline of lead prices. Some retail quotations were in discounts of 150-0 yuan/mt over the SMM 1# lead average price. In mainstream trade markets such as Jiangsu, Zhejiang and Shanghai, the mainstream quotation of domestic lead maintained a discount of 40-0 yuan/mt over the SHFE lead 2207 contract. In terms of secondary lead, the smelters were unwilling to ship as the lead prices fell, and the secondary refined lead was shipped in discounts of 150--50 yuan/mt over SMM 1# lead average price. The lead futures declined slight, and the stockholders lowered the quotation while the discounts of some quotations narrowed slightly. In addition, due to the production reduction of primary lead and secondary lead smelters, the supply difference between north and south regions was huge and the retail transactions were modest.

Lead price forecast: In terms of macro, the president of the European Central Bank reiterated plans to raise interest rates in July and September and hinted that the rate hikes may come at the same time as stopping asset purchases. Hawkish Fed officer warned that without action, inflation expectations could be volatile.  In terms o Fundamentals, the lead prices may stop decline and rebound amid the support of the domestic secondary lead cost. At the same time, there were relatively intensive production reduction in primary and secondary lead, hence the supply was tight and the subsequent increase in lead ingot inventories may be suppressed. The lead price will rebound and may rise. It is also worth noting that as the lead consumption did not yet recover, lead prices may fall from high level. It is expected that the spot lead will rise 175-225 yuan/mt from yesterday.