The Rise in Lead Prices Was Short-Lived: What Is the Future Trading Logic? [SMM Analysis]

Over the past week, lead prices have fluctuated significantly. Initially, supply-side conflicts pushed SHFE lead prices over 17,000 yuan/mt, with the most-traded SHFE lead contract reaching a nearly one-month high of 17,295 yuan/mt. However, this rally did not last long, as prices began to pull back in the latter half of the week, leading the market to describe the rise as "short-lived."

Since November, end-use consumption in the lead-acid battery market has been steadily increasing. Considering the seasonal stocking routine, the operating rate of producers has reached a nearly four-month high. According to an SMM survey, as of mid-November, the weekly operating rate of lead-acid battery producers reached 75.47%.

Since mid-October, some northern regions have started heating, and frequent smog warnings have been issued. Areas such as Hebei, Henan, and Anhui have experienced production restrictions at lead smelters or vehicle transportation controls, thereby limiting the supply of lead ingots in the market. Both primary and secondary lead have generally been traded at a premium.

The rapid pullback in lead prices can be attributed to the exhaustion of previous bullish factors, which have now turned bearish. On one hand, the rise in lead prices has restored the profitability of secondary lead, leading smelters to resume production. On the other hand, smog warnings in Hebei, Henan, and other regions are expected to be lifted, potentially increasing lead ingot supply this week. As lead supply recovers, we need to monitor the supply of raw materials such as lead concentrate and scrap. The profitability of secondary lead smelters is positively correlated with their resumption of production, indicating that without an improvement in raw material supply, the downside room for lead prices will be relatively limited. Additionally, we need to pay attention to the restocking actions of downstream enterprises following the initial rise and pullback in lead prices. If consumption materializes, lead prices could stabilize.