Lead prices to move at a high level this week

The macroeconomic data due this week mainly include China’s GDP growth rate for 2023, annualised fourth quarter GDP, annualised retail sales of consumer goods in December, annualised added value at large-scale industrials in December as well as US December retail sales. The Federal Reserve will release its Beige Book on economic conditions. The current global political turmoil is intensifying, including the Israeli-Palestinian conflict, the Red Sea incident, North Korea-South Korea issues, etc. The market is concerned about the downside risk of economy.

In terms of LME lead, the decline in LME lead stocks expanded, with a weekly drop of 6,575 mt. The contango of LME lead shrank to $28.3/mt. LME lead prices will run at $2,055-2,135/mt this week.

In terms of SHFE lead, a large number of primary lead and secondary lead companies have reduced and suspended production, tightening the supply of lead ingots. The delivery of the SHFE front-month contract will lead to accumulation of social inventory of lead ingots. This week, eyes will be on whether the impact of production restrictions in Anhui due to haze can be lifted. If companies resume normal production, lead prices will gradually fall; otherwise, the supply tightness of lead ingots will intensify, thus lead prices will continue to rise. The most traded SHFE lead contract is expected to trade between 16,050-16,500 yuan/mt.

The spot prices are expected to move between 16,050-16,350 yuan/mt. In terms of primary lead, the maintenance of smelters has been completed, and the supply of lead ingots is expected to increase slightly. However, supply in the spot market will tighten due to the delivery of the SHFE 2401 lead contract. Spot lead is expected to continue to trade at a premium. In terms of secondary lead, production restrictions in Anhui linger, hampering the recovery of secondary lead supply. Secondary lead mostly traded with premiums. According to feedback from local companies, there is still uncertainty whether the production restrictions will be lifted this week. It is expected that the spot premiums will remain. In terms of consumption, after the New Year's Day holiday, downstream companies basically resumed normal production. Downstream companies purchased more actively due to pre-CNY stockpiling. However, after the lead price rose, some companies became cautious about purchasing high-priced lead.