On the afternoon of November 6, the US presidential election concluded, with Republican presidential candidate Donald Trump securing 270 electoral votes first, clinching the victory. He subsequently delivered his victory speech. His opponent, Democratic candidate Kamala Harris, conceded defeat and congratulated Trump on his election on the afternoon of the 6th local time. During this period, the US dollar index surged to a nearly four-month high, causing LME lead to fluctuate downward, which in turn led to a brief weakening of SHFE lead.
On November 7, market sentiment gradually stabilized, and the US dollar index began to decline, leading to a general rebound in base metals. Lead futures rallied, with the most-traded SHFE lead 2412 contract rising above the 16,900 yuan/mt mark. Although lead prices were buoyed by macro factors, they are expected to return to fundamentals once macro sentiment subsides. So, what factors are influencing recent lead price trends from a fundamental perspective?
1. Raw Material Prices Support Lead Prices
Currently, China's lead smelting industry is experiencing a persistent raw material shortage, with raw material prices already supporting lead prices. The raw material for primary lead—lead concentrate—is in short supply, and domestic lead concentrate TC continues to decline, reaching historical lows in 2024. (Note: Lead concentrate price = SMM 1# lead average price - TC; the lower the TC, the more expensive the lead concentrate.) After the Start of Winter, the "stockpile for winter" behavior of smelters and traders may push prices further up. The raw material for secondary lead—battery scrap—is also in short supply. In 2024, China's secondary lead capacity has reached 10 million mt, with battery scrap processing capacity around 16 million mt, while the generation of battery scrap is only around 8 million mt, indicating severe overcapacity in the industry. Entering November, the traditional off-season for lead-acid battery consumption, the scrapping volume of used batteries is poor. Coupled with the holiday breaks during New Year's Day and Chinese New Year, battery scrap recyclers take a break and do not collect goods. The raw material stocking of secondary lead smelters may keep battery scrap prices high.
2. Lead Prices Fluctuate Rangebound amid Weak Supply and Demand
From January to September 2024, China's lead ingot production was less than 6 million mt, down 10.58% compared to the same period in 2023.
In H2 2024, the peak season for lead-acid battery consumption has yet to materialize, and the monthly operating rate has been declining.
Against the backdrop of weak supply and demand, lead prices have shifted downward and fluctuated within the 16,100-17,700 yuan/mt range. Entering November, with the seasonal return of automotive consumption, downstream lead-acid battery demand has relatively improved, and battery producers' willingness to purchase lead ingots has increased compared to earlier periods. However, the overall consumption situation does not provide strong upward momentum for lead prices. Additionally, as the weather turns colder, the heating has started in the north, and pollution weather may become frequent. Environmental protection-related controls are expected to impact lead ingot supply, increasing the likelihood of lead prices fluctuating upward.
In summary, the direct impact of Trump's election as US president on lead prices is temporary, but the policy uncertainties brought by his election will have a lasting impact on lead prices. The influence of fundamentals on lead prices is enduring and certain. We need to closely monitor year-end raw material prices, lead ingot supply, and lead-acid battery consumption!
