Lead prices will stop falling and rise this week. The United States will announce the annualised CPI before seasonal adjustment in February, the monthly retail sales in February, the monthly and annualised PPI in February, and one-year inflation rate expectations in March.
Last week, the probability of Feb raising interest rates by 50 basis points in March increased to more than 70%, strengthening the dollar and ultimately weighing on non-ferrous metals. The economic data released this week may directly affect the direction of the Fed’s interest rate meeting next week. LME lead prices posed a six-day losing streak due to the strong US dollar. LME lead inventory increased, and LME cash to three-month contract reported contango structure. Combined with lower natural gas prices in Europe and the US, lead smelting cost declined. Fundamentals are weak, and lead prices will move at lows given a strong US dollar.
LME lead is expected to run between $2,045-2,130/mt. The regional supply tightness of the lead market became more severe last week due to unexpected maintenance at one large-scale secondary lead smelter. In the meantime, prices of secondary refined lead topped those of primary lead in some regions, which weakened the impact of the traditional off-season of lead consumption and the expected accumulation of inventory. Spot supply is expected to remain tight this week due to the delivery of the SHFE 2303 lead contract, which may provide support for lead prices. Should the expectations of stock accumulation not materialise after delivery, lead prices may stop falling and rally.
The most traded SHFE lead contract is expected to stand between 15050-15,300 yuan/mt this week. The spot prices are expected to move between 14,950-15,200 yuan/mt. In March, there will be output growth and maintenance in the primary and secondary lead markets. The decline in supply will outstrip the growth, which will significantly reduce available cargoes in the market. And most smelters will sell with premiums. The off-season for lead has not set in. And downstream companies purchase on demand. Before lead prices rebound, primary lead and secondary lead are likely to be traded with premiums.
