Unlike other base metals prices, lead ingot prices had not been affected so much in 2022 by the epidemic, interest rate hikes, the conflict between Russia and Ukraine, and other macro factors, but mainly by its fundamentals and the elasticity of recycled lead production. According to Mysteel's assessment, the average price of 1# lead ingot in China only increased by Yuan 1/tonne year on year to Yuan 15,167/tonne in 2022. The price would not change too much in 2023. The Shanghai Futures Exchange lead price is expected to mainly centralize at around Yuan 15,500/tonne and run in the range of Yuan 14,000-17,000/tonne.
China's lead ingot output decreased slightly to 6.54 million tonnes in 2022, mainly from secondary lead whose output decreased by 3.95% year on year to 3.46 million tonnes, according to Mysteel's survey. This was mainly due to the epidemic, environmental protection policies, and the continuous loss of 4-5 months suppressed the production of secondary lead producers. However, China's primary lead ingot output increased by 4.01% year on year to 3.08 million tonnes, in addition to the normal production of original capacity, it was mainly due to the newly increased and original capacity release of smelters in Henan and Hunan provinces in November and December. However, the overall lead ingot demand was stable although exports of lead ingots and lead batteries performed relatively well.
Lead gained a lot of attention from the capital in the short term after Bloomberg announced at the end of October 2022 that the LME lead would be included for the first time in the benchmark index of the Bloomberg Commodity Index (BOCM) in 2023. Besides, market expectations on macro factors turned optimistic. Therefore, positions of SHFE lead doubled and the proportion of long positions by investment funds of LME lead increased significantly. However, Mysteel expects that the focus of capital on lead will gradually decline after January 2023 and the pricing of lead will return to fundamentals.
In addition, China's epidemic prevention policy has been gradually optimized. The interest rate hike expectation will come to an end with the cooling of inflation. At the same time, some countries may end in advance or slow down the interest rate hikes on increasing economic pressures. However, an adverse effect on the economy caused by interest rate hikes will be further revealed. Besides, the Yuan will rise against the US dollar in 2023. All these will support commodity prices.
Back to fundamentals, China's lead ingot output will continue to increase since there will be a release of new capacity in both primary and secondary lead, mainly concentrated in Hunan, Henan, Hebei, and Guangxi provinces. Meanwhile, lead inventory in China is expected to increase since the first quarter of 2023, hitting a high of 0.15 million tonnes perhaps, even though the domestic lead ingot social inventory and LME lead warehouse receipt inventory are at a low level at present. As for the demand, it will remain stable as a whole. However, the export of secondary lead may continue to rise in 2023 since the lead price is strongly supported by increasing recycling smelting costs caused by strong prices of waste batteries.
Please contact xuzhongping@mysteel.com for Lead Database with more details.
Written by Paula Xu, xuzhongping@mysteel.com