Lead prices have more room to fall in the short term even though they have dropped for half a month, we believe.
Production recovery following the end of environmental probes, lacklustre demand from the lead-acid battery industry, as well as lingered trade tension between China and the US will be the main factors.
In fact, we think prices would only rebound when downstream demand recovers.
As of Monday July 16, we assessed #1 lead at 19,725 yuan/mt, down 200 yuan/mt from last Friday, and down 1,475 yuan/mt from a nine-month high on June 29.
Output of both primary and secondary lead resumed gradually in Hebei and Anhui provinces after the national environmental reviews ended in late June. In addition, secondary lead producers in Henan and Jiangxi provinces are expected to recover in late July after local environmental inspections come to an end.
On the demand front, lead-acid battery plants saw no increase in their orders in July. Some lead-acid battery plants in Yichun city of Jiangxi province suspended production again after a brief recovery at the start of this month due to a new round of environmental probes by local government. The impact will sustain to late July.
Separately, while primary lead inventory in Shanghai and Guangdong shrank 1,100 mt from a week ago to 7,600 mt as of Friday July 13, stocks are forecast to accumulate this week after the futures delivery date.