Be wary of the risk of lead prices falling

Key economic data due in the week of May 13 includes the annualised CPI in the US in April before seasonal adjustment, retail sales in the US in April, the annualised China’s total retail sales of consumer goods in April, and the annualised China’s industrial added value at large-scale industries in April. Meanwhile, we need to pay attention to the speeches of FOMC voting members on the economic outlook in 2024.

In terms of LME lead prices, LME lead stocks have continued to decline since May, down 31,400 mt in the week ending May 10. The contango of LME cash to the three-month contract widened and stood at $44.3/mt as of May 9. This means that the decline in lead inventory was not driven by an improvement in consumption. The tightness in lead concentrate supply may keep lead prices rangebound at highs. LME lead prices are expected to run between $2,200-2,270/mt in the week of May 13.

As for SHFE lead, raw material shortages intensified after the Labour Day holiday. After the implementation of the "reverse invoicing" policy for battery scrap, the reduction in recycling volume and the increase in tax costs will drive the rise in lead prices. It is expected that the most active SHFE lead contract prices will run at 17,700-18,400 yuan/mt in the week of May 13.

The spot prices are expected to move between 17,300-17,850 yuan/mt. The output of primary lead and secondary lead in May is expected to decline month-on-month. Meanwhile, there will be less supply in the spot market due to the delivery of the SHFE 2405 contract in the week of May 13. Primary lead is likely to maintain a strong premium. As for the secondary lead sector, the amount of scrap recycling has rebounded, and the high prices have incentivised smelters to sell. Secondary lead may still be traded with discounts. In terms of lead consumption, due to rising battery prices, orders have picked up and subsequent demand may improve.

According to the SMM model, the range of the average SMM #1 lead ingot price is [16,650, 17,565] in the week of May 13, with an average of 17,160. The unit is yuan/mt. The extreme price range is [16,010, 18,200], the normal price range is [16,440, 17,780], and the conservative price range is [16,860, 17,350]. Prices will obtain support in the range of [16,440, 16,860] and meet resistance in the range of [17,350, 17,780].

According to the SMM model, the price range of the closing price of the most active SHFE lead contract is [16,890, 18,025], with an average of 17,540. The extreme price range is [16,380, 18,550], the normal price range is [16,720, 18,200], and the conservative price range is [17,060, 17,850]. Prices will obtain support in the range of [16,720, 17,060] and meet resistance in the range of [17,850, 18,200].