SHANGHAI, July 27 (SMM) - 

Background

In July, the lead prices rose after falling. The most traded SHFE lead contract rebounded after dropped to the lowest point at 14,345 yuan/mt. In late-July, the lead prices rose for seven trading day to 15,300 yuan/mt. The market was in a strong wait-and-see sentiment. At the same time, the LME lead also stopped falling in mid-July as the bears of overseas interest rate hikes and economic recession expectations paid off. The LME lead prices rebounded to $2,000/mt, which provided support for the longd in the SHFE lead market.

Spot prices

SMM1# lead spot prices rose to 15,000 yuan/mt after falling to the lowest point of 14,575 yuan/mt. According to SMM research, the downstream enterprises stockpiled on dips in the early stage. In addition, the monthly average prices were lower than the spot prices at the end of the month. Therefore, the market generally purchased in the forms of long-term orders and the transactions in the form of small orders were inactive. With the rise of lead prices, the downstream enterprises wait-and-see and purchased as needed, hence the overall transactions in the trade market were poor.  

Fundamentals

 According to customs data, China's lead concentrate imports stood at 62,700 mt in physical content in June 2022, down 36.49% on the month and 31.96% on the year. Although the SHFE/LME price ratio rebounded in late-June, the imports of overseas lead concentrate did not increase due to the decline in imported TCs and the wait-and-see sentiment of smelters. As the import window opens, the lead concentrate imports has theoretically turned losses into gains. It is still necessary to pay attention to the import of lead concentrate in the later stage. According to SMM research, the TCs of lead concentrate remained at 800-1,200 yuan/mt in early-July, and only a few smelters raised the TCs slightly due to the high raw material inventory level and the procurement of imported lead concentrate. However, most quotations of lead concentrate were flat from that in June. At the end of July, some mines slightly raised the TCs of zinc concentrate, but the TCs of lead concentrate remained flat as the supply was still tight.

In terms of refined lead, the supply and demand of spot lead ingots increased. In July, the production of both refined lead and secondary refined lead recovered. However, the production of secondary refined lead was affected by the power rationing in Anhui and the holidays in Guizhou. The other secondary lead smelters that were in maintenance are expected to resume some of the capacity in early and mid-August. In this case, the supply of lead ingots have increased steadily. In terms of refined lead consumption, as the operating rates of downstream lead-acid battery enterprises rose for several consecutive weeks, the consumption gradually improved. As the downstream tended to purchase in the form of long-term orders, the retail transactions were poor and enterprises mainly purchased as needed.

In terms of inventory, the inventory of lead ingots fell below 100,000 mt amid the delivery of SHFE 2207 contract and the downstream procurement amid the low prices. However, the decline of social inventory may slow down as the downstream restocking increased.

Summary and Outlook

On the macro front, the Federal Reserve will announce the results of its interest rate meeting at 2 am on Thursday. Although the market has fulfilled the expectations of a 75 basis point rate hike in advance, the current market was still very cautious. The US dollar index fluctuated sideways. In late-July, lead futures rose amid the bullish market and the rising operating rates of downstream. The most traded lead 2209 contract fell slightly after rising to 15,295 yuan/mt on Tuesday. In this case, the bulls were cautious, and the increase in prices was limited. The weak overseas economic environment will still affect the prices of commodities in August, but the improvement of downstream operating rates and economic recovery will provide support for spot prices. In addition, due to the high temperature, the replacement of battery scrap will gradually increase. It is still necessary to pay attention to the impact of the increase in supply on lead prices after the replenishment of secondary refined lead raw materials.