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Lead Weekly Report Summary: Analysis and Key Insights

This report from Hongyuan Futures Research Institute provides an analysis of the lead market as of September 9, 2023. The focus is on supply-demand dynamics, inventory levels, and market outlook, based on data from sources like Wind, SMM, and the firm's research.

• Overview: The lead market is experiencing tightness in raw material supply and varying demand patterns. The spot price is relatively high, but effective price transmission to downstream is limited, leading to inventory accumulation and market volatility. The key drivers include raw material shortages, production adjustments, and macroeconomic risks.

• Key Findings from Raw Material End:

  • Domestic and imported lead concentrate processing fees remain low, indicating reduced profitability for mining operations. Trade markets have an abundant supply but insufficient demand, exacerbated by higher recycling costs due to scarce and expensive scrap batteries. This tightness persists, with processing fees staying weak and stable.

• Supply End:

  • Production is recovering in Henan and Hunan regions, with some facilities resuming operations or increasing output. Constraints in Yunnan due to raw material shortages force some smelters to use alternative inputs. Recycling firms are expected to boost production, increasing demand for scrap batteries and contributing to price pressures.

• Demand End:

  • Lead battery demand is mixed, with automotive batteries performing well amid seasonal demand, while electric bicycle batteries show weaker uptake. Most downstream demand remains刚需-based, with limited market enthusiasm, partly due to phasing out of production in some areas.

• Inventory and Market Dynamics:

  • Social inventories are accumulating at high levels, boosted by a widening basis (price difference between spot and futures) that incentivizes delivery and reduces market circulation. The LME inventory status shifted to net decrease, contrasting with Shanghai Futures Exchange inventories, which are rising.

• Market Outlook:

  • Short-term, lead prices are expected to range between 16,800–17,300 CNY/ton, exhibiting high volatility. Risks include inventory accumulation pressuring prices downward and macroeconomic factors. Export windows remain closed, limiting additional supply avenues.

General considerations: Overall, the market faces ongoing supply constraints and uneven demand absorption, with no immediate signs of easing. Lead prices may consolidate in the near term but remain sensitive to inventory build-ups and external uncertainties.