Lead Prices to Continue to Consolidate This Week

Trading days will be reduced this week due to domestic and overseas holidays. The SHFE was closed for one day due to the Chinese Qingming Festival (April 5); the LME will also be closed for one day on April 7 due to Good Friday. Macro data due this week mainly include manufacturing PMI data for March in Europe, the United States and China, as well as ADP’s payrolls, the unemployment rate in March and the seasonally adjusted non-farm payrolls in the United States in March. Since the demise of Silicon Valley Bank, the credit of the US dollar as a safe-haven asset has been downgraded. The market has generally expected a slowdown in interest rate hikes. The US dollar may continue to weaken, and its pressure on non-ferrous metals has eased.

The backwardation structure on LME lead stood at $23/mt as of March 30. LME lead stocks rose 675 mt last week. At present, the performance of the overseas lead consumption sector is lacklustre, and production reduction at mines is unlikely to affect lead ingot production, limiting lead price gains. LME lead should consolidate at the current level and is expected to run between $2,080-2,150/mt this week.

Entering April, the traditional off-season for lead battery may affect the market more significantly, and the weaker consumption will have a direct negative effect on the lead prices. There will be both maintenance and production resumptions at secondary lead and primary lead smelters, limiting the growth in lead ingot supply. LME lead has outperformed SHFE lead recently, reopening the export window. The resulting export growth will be one of the driving factors of further lead ingot inventory declines. The most active SHFE lead contract may move between 15,150-15,400 yuan/mt.

The spot prices are expected to move between 15,000-15,250 yuan/mt. The regional supply may continue to be tight, while downstream companies tend to produce base on sales during the off-season. Both supply and demand will remain weak. After the lead prices fell last week, the discounts of primary lead and secondary lead narrowed, and the discounts may remain small this week.