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Analysis: Lead in rangebound trading on weak demand


SHFE lead broke through the 19,500 yuan/mt level these days against the backdrop of better macroeconomic environment, production restriction in Henan province and natural gas rationing in Anhui province.

However, prices came back down as downstream demand has yet to pick up and tighter capital at the year-end limited transactions. SMM believed lead price is set to be rangebound in the near term at 18,700-19,300 yuan/mt due to several factors.

Winter restocking done, demand weakens

Lead concentrate treatment charges (TCs) for both domestic and imported materials have been declining this year. SMM understood that winter restocking has come to an end while demand in Henan was weakened due to green policies

Production restrictions and gas rationing set to be loosened

The production limits and gas rationing policies in Henan and Jiangxi are set to be loosened in the New Year, SMM learned.

Spot discount deeper, inventory lower

Spot lead has traded at a discount due to tighter fund at the year-end and weaker downstream demand.

However, inventory levels have come down over the past week and more trading actions were seen. With the loosening of production limits and gas rationing policies next year, we expect production to recover and inventory return higher.

Weak downstream demand

The major lead consuming industry is storage battery and the market data last week showed lacklustre demand. Storage battery producers were also affected by the gas rationing and green policies.

 Source: SMM