Lead prices are expected to continue consolidating next week, according to a weekly forecast published by Shanghai Metals Market (SMM), as lead ingot supply and demand both decline. SMM notes that the coming week has few major macroeconomic releases, with the US October unadjusted CPI year-on-year rate and the revised Eurozone Q3 GDP year-on-year figure scheduled for publication. On the macroeconomic front, SMM points to the US midterm elections, in which the Democrats secured control of both the House and the Senate.
According to the report, the market quickly repriced its outlook for "constrained fiscal expansion," as political gridlock may curb further tax cuts and large-scale spending, cooling expectations for federal borrowing demand. SMM also said the Democrats may push for an earlier end to the months-long Iran conflict, and that market expectations for the resumption of navigation through the Strait of Hormuz are rising, with geopolitical easing reflected mainly in improved negotiation expectations. For LME lead, SMM reports that inventories continued to decline, falling to near the 300,000 mt mark, while the LME Cash-3M spread remained in contango, last reported at -$31.91/mt.
SMM expects that once macro risk events have settled, prices will return to fundamentals, particularly as lead concentrates and lead ingots enter the long-term contract negotiation cycle. Tight supply of lead ore and other raw materials remains an important support factor. In the short term, LME lead is expected to trade in a range of $1,875-1,920/mt next week.
On the Shanghai Futures Exchange (SHFE), SMM identifies inventory destocking, driven by tightening lead ingot supply, as the main driver of prices. However, increased arrivals of imported lead and weakening demand in the lead-acid battery market are restraining the pace of price gains. SMM describes the overall market as one in which supply and demand are both declining, with bullish and bearish factors coexisting.
The most-traded SHFE lead contract is expected to trade between 15,800 and 16,250 yuan/mt next week. In the spot market, SMM's forecast is 16,100-15,850 yuan/mt. On the consumption side, lead-acid battery demand is turning weaker, downstream purchasing power is declining, and the sustainability of ingot destocking is limited.
On the supply side, secondary and primary lead enterprises are seeing both production increases and decreases. After the recent price rebound, the spread between primary and secondary lead widened, although supply in some regions remains constrained. SMM expects the spot market to maintain premium trading.
Source: Shanghai Metals Market (SMM), SMM lead market weekly forecast, news.metal.com. According to SMM, except for publicly available information, its data are processed based on publicly available information, market communication, and its internal database model. They are for reference only and do not constitute decision-making recommendations.
Source: news.metal.com