This week, the lead price in the Yangtze River spot market displayed a pattern of initial weakness followed by stabilization and a slight recovery.
The average price for Yangtze spot 1# lead started the week at 16,150 yuan per tonne. Pressured by off-season demand, it declined for two consecutive days, hitting a weekly low of 15,775 yuan per tonne and breaching the 16,000 yuan psychological level. By the week's end, supported by cost factors, the price stabilized and rebounded, with the average price on July 3rd recovering to 15,975 yuan per tonne. The weekly average price settled at 15,960 yuan per tonne, marking a slight decrease of 40 yuan per tonne compared to the previous week, reflecting a characteristic of bottoming out within a weak, volatile market.
The week began with lead prices declining from 16,150 yuan per tonne, pressured by heightened expectations for Federal Reserve interest rate hikes and a strong US dollar. This was compounded by downstream battery manufacturers conducting semi-annual inventory checks, leading to persistently subdued essential procurement. Mid-week, a slight dip in the manufacturing Purchasing Managers' Index (PMI) confirmed a slowdown in domestic demand recovery, reinforcing the off-season demand narrative, causing lead prices to hover around 15,825 yuan per tonne. However, tight supply of scrap batteries and production cuts by loss-making secondary lead smelters created a firm cost floor, gradually exhausting the downward price momentum. Towards the week's end, a significant miss in US non-farm payrolls data pushed back expectations for rate hikes and led to a weaker dollar, improving market sentiment. Coupled with expectations for domestic growth-supporting policies, lead prices staged a modest rebound to 15,975 yuan per tonne, though high inventories and off-season terminal demand capped the recovery.
Overall, macro expectations dictated the short-term volatility, while supply-demand fundamentals defined the price range. The market is characterized by coexisting cost support and demand pressure, maintaining a weak, volatile pattern.
Current Supply-Demand Dynamics for Lead
Domestically, the lead raw materials market this week was characterized by a core pattern of tight ore and scrap supply alongside diverging supply and demand. On the primary ore side, supply of lead sulfate, cerussite, and galena ores remains consistently tight. The release of new global mining capacity is slow, domestic lead concentrate processing fees stay low, imported ore processing fees are persistently inverted, and high-grade ore sources are scarce, providing solid cost support for primary smelting. On the secondary raw materials side, scrapped lead-acid battery volumes are seasonally low, recyclers are reluctant to sell, and the supply of lead-containing scrap materials continues to tighten. Prices for scrap electric vehicle batteries remain high. Secondary lead smelters are generally operating at a loss, with industry operating rates below 30%, limiting supply growth. Downstream, lead-acid battery production has entered its traditional off-season, with a lackluster recovery in terminal orders. Enterprises are only maintaining essential restocking, creating a stalemate between cost support and weak demand, prolonging the market's deadlocked sentiment.
Summary and Outlook
From June 29th to July 3rd, on the international front, shifting Federal Reserve policy expectations, weaker-than-expected ADP employment data alongside continued manufacturing expansion, and the US dollar index returning above 101 pressured LME lead down to $1,868 per tonne. Domestically, with growth-supporting policies being implemented and manufacturing recovery momentum still present, Chinese lead prices maintained a weak, volatile range between 15,800 and 16,350 yuan per tonne, as secondary lead cost support contended with off-season demand.
Looking Ahead: July 3rd to 10th
Internationally, focus will be on the US non-farm payrolls data and signals from the Federal Reserve's July policy meeting, with the European Central Bank's actions following cooling Eurozone inflation also warranting attention. Domestically, the final PMI reading and the effectiveness of implemented growth-supporting policies will be key. In the short term, following the release of the jobs data, a phase of macro headwinds may clear. A weaker dollar could support a valuation recovery for dollar-denominated commodities. With cost support, lead prices are expected to continue a weak rebound, likely maintaining a range-bound pattern. The core range for domestic spot lead is anticipated to be 15,700-16,400 yuan per tonne, with LME lead between $1,870 and $1,900 per tonne. A supply surplus will cap the upside, while the cost line will limit the downside. It is crucial to recognize that the global refined lead surplus for the year remains unchanged, the fundamental contradiction of weak off-season demand has not been substantially alleviated, and high inventory levels remain a key constraint on any upward movement.
Trading Strategy Considerations
It is advisable to approach the market with a range-trading mindset. Excessive optimism about the rebound's extent is unwarranted, and caution is needed against the risk of renewed short positioning once the non-farm payrolls sentiment fades. A genuine trend reversal likely requires waiting for the start of pre-school season stockpiling in mid-to-late August or clearer signals of a policy shift on the macro front.
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