LME Lead Fell for Three Consecutive Times! How Long can SHFE Lead Rise after the Bulls Pay Off?

SHANGHAI, June 24 (SMM) - LME declined Since June 8 and as of 17:56 yesterday, LME lead fell to $1,971.5/mt, a new low since April, 2021. SMM believes that, on the one hand, the LME lead declined because the overall macro environment was negative amid the high US dollar. On the other hand, the LME lead stocks maintained stable since April 29, but since June 9, the LME lead stocks started to increase slowly. SMM believes that this may be driven by the early export of lead ingots arriving at ports. Therefore, although the overseas lead ingot consumption was modest, it is expected that LME lead stocks may still increase slightly in the near future.

The increase of inventories was a bearish factor for the LME lead prices. However, it should be noted that the LME lead prices continued to fall, and the SHFE lead rose while LME lead fell.The SHFE/LME price ratio expanded amid the increase of SHFE lead and decline of LME lead, which may be beneficial to the import of lead concentrates. SMM will continue to pay attention to the raw material supply change of primary lead and secondary lead after the import window opens.

In terms of domestic market, under the background of the general decline of non-ferrous metals, the most traded SHFE lead finally fell by 0.43% to 15,080 yuan/mt yesterday.

The spot prices also fell slightly yesterday, according to the latest SMM spot price, the spot price of SMM 1# Lead ingot fell to 14,950-15,050 yuan/mt with an average price of 15,000 yuan/mt.

In terms of fundamentals, the production of primary lead declined recently due to the reduction in production in Yunnan and the relocation and suspension of the refined lead smelters in Hunan. While the production of secondary lead also partially reduced due to the tight supply of battery scrap and environmental inspections. Therefore, the supply pressure was released significantly.

In terms of inventory, according to the latest inventory data of SMM, as of June 20, the total inventory of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin reached 94,200 mt, an increase of 1,100 mt from last Friday. Although the overall inventories continued to increase, the growth rate slowed down obviously. In addition, primary and secondary lead smelters intensively reduced the production, hence SMM expected that the increase of lead ingot inventories may slow down or even decline slightly.

In terms of consumption, compared with May, there were signs of improvement in June. The orders for the battery sector for automobiles improved, but the consumption of other sectors did not improved, so the inventory of finished battery products still did not fall

Overall, the bulls of lead ingot supply reduction paid off, and the consumption did not yet improve, hence the spots were generally shipped in large discounts. It is expected that the short-term lead prices may fall, and the follow-up lead prices will remain at 14,900~15,300 yuan/mt.