Rising Supply and Demand May Boost Lead Prices

SHANGHAI, Feb 14 (SMM) - The market has expected the Fed to raise the interest rate by 25-50 basis points in March. At the same time, the Fed Board of Governors will hold a closed-door meeting to review and determine the lending ratio and discount rate this week. The US Senate Banking Committee will vote on Powell's nomination of Fed chairman as well as the nominations of four Fed officials. The determination of Fed officials will also direct the future market policies to a certain extent.

The tight power supply and high costs in Europe affected the metals production, which drove up the LME lead prices and made up for the losses during the CNY holiday. The power supply in Europe will remain short this week, while the LME lead stocks will change little coupled with expected China’s exports of lead ingots to Europe. LME lead may test $2,300/mt, but the monetary policies are likely to weigh on the prices. LME lead is expected to trade between $2,200-2,300/mt this week.

The SHFE lead was dragged down significantly by LME lead and hit the break-even point early last week, and then rebounded. The lead ingot inventory increased as expected after the CNY holiday. The enterprises from the lead industry chain kept resuming the production last week, and SMM will monitor inventory change of lead ingots. The 3% value-added tax (VAT) will be levied on the lead-acid battery scrap starting from March, which may increase the costs and tighten the supply of standard battery scrap. Hence the SHFE lead may move upward. The most traded SHFE lead contract is expected to trade between 14,950-15,550 yuan/mt this week.

The spot prices are expected to move between 15,000-15,300 yuan/mt this week. The primary lead smelters were resuming the production as expected last week, and some smelters had a certain amount of inventory, who shipped for the small orders at discounts. The large-sized secondary lead smelters general had higher inventories after the CNY holiday, and the medium and small-sized smelters were also resuming the production. The secondary lead smelters mainly shipped the goods at discounts. The downstream enterprises were coming back to work as well, and the production is expected to recover further this week as more workers will return to the factories. However, the end consumption was not strong, and the downstream users purchased lead ingots cautiously. The downstream restocking demand is expected to grow this week.