Supply pressure remained high, lead prices amid reduced short positions

SHANGHAI, Apr 21 (SMM)—Social inventory of lead ingots continued to rise to more than 70,000 mt, further weighing on lead prices. The production of primary lead smelters was stable, and the inventory of finished products decreased on the month as some smelters delivered spots. Profits of secondary lead smelters narrowed amid rebounding lead prices, and smelters were more active to ship goods. The price spread of secondary and primary lead expanded to 200 yuan/mt. The lead-acid battery market consumption was light in the traditional off-season. In addition, the automobile chip production was suspended, which may impact the consumption of automobile batteries. Therefore, the supply still exceeded demand, and the lead price rebound is expected to be limited. The risks lied in the high open interest volume, and the speculative bears may leave the market and promote the price rebound.

LME lead inventories decreased in the second consecutive week by 2,225 mt as of April 15. Cash contract discounts was narrowed, indicating that overseas consumption was recovering. The market will focus on whether the SHFE/LME ratio will rise. LME lead is expected to move between $1,990-2,065/mt. The price of most traded lead futures contract will stand between 14,800-15,200 yuan/mt.

The spot prices are expected to move between 14,800-15100 yuan/mt this week. Domestic supply of lead ingot will be sufficient this week, while most downstream users bargain hunted amid wait-and-see mood, and the consumption is hard to improve. The supply of lead-acid battery scrap remains tight, which may extend through the year, so the profits of secondary lead smelters will be meager. The price spread between refined and scrapped lead will stand around 200 yuan/mt.