- LME lead prices ease despite nearly 12,000 t weekly inventory drawdown
- Battery operating rates improve but physical demand remains cautious
London Metal Exchange (LME) lead prices moved lower during the week despite continued inventory drawdowns, as cautious physical demand and limited downstream buying capped the upside.
LME lead cash-settlement prices declined 0.9% to $1,854/t on 11 September from $1,871/t on 4 September. The three-month contract also fell 0.9% to $1,897/t from $1,914/t.
Meanwhile, LME lead inventories declined by 11,950 t, or 3%, to 380,025 t from 391,975 t. Compared with 3 September, stocks have fallen by 16,800 t, or 4.2%, indicating continued tightening in exchange availability.
LME inventory drawdown provides support
LME lead inventories continued their downward trend, falling from 391,975 t on 4 September to 380,025 t on 11 September.
Since 21 August, when stocks stood at 416,850 t, inventories have declined by 36,825 t, or 8.8%. However, the sustained drawdown has not translated into a stronger price rally, indicating that weak physical demand continues to offset the support from tighter exchange stocks.
The cash-to-three-month spread remained at around $43/t backwardation during the week, indicating continued near-term tightness, although this has yet to generate significant upward momentum.
Battery operating rates improve
Lead-acid battery production continued to improve as the market entered the seasonal peak period.
The comprehensive operating rate of battery producers across key regions rose to 70.4%, up 0.76 percentage point w-o-w. Better production conditions and improving orders supported operating rates.
However, end-use demand remains uneven, particularly across e-bike and automotive battery segments. Downstream buyers continue to procure cautiously, while spot transactions remain moderate.
Seasonal factors could provide further support to battery production through September, although a stronger recovery in end-user consumption will be required for a sustained increase in refined-lead demand.
MCX lead remains stable, open interest declines
MCX lead remained broadly stable during the week. The September contract closed at INR 196.40/kg on 11 September, compared with INR 196.35/kg on 4 September.
Open interest declined from 768 lots to 666 lots, down 13.3%. The combination of stable prices and lower OI suggests that recent weakness has not been accompanied by significant fresh short positioning.
MCX lead therefore remains range-bound, with support from tighter LME inventories partly offset by subdued domestic demand.
HZL lead benchmark rises
Hindustan Zinc Ltd (HZL) raised its lead benchmark by INR 400/t on 10 September to INR 212,200/t.
The revision followed a INR 1,200/t reduction on 3 September, when the benchmark was cut to INR 213,400/t. The latest move indicates some firmness in the domestic market despite continued volatility in international lead prices.
Outlook
BigMint expects LME lead prices to remain range-bound in the near term as continued inventory drawdowns and improving battery production are balanced by cautious physical demand and downstream procurement.
LME inventories have fallen by nearly 37,000 t since 21 August, providing a downside cushion to prices. However, the limited price response suggests that tighter exchange availability alone is unlikely to trigger a sustained rally.
In India, stable MCX prices and declining open interest indicate cautious market sentiment, while HZL’s latest increase provides some support to domestic prices.
Market participants will closely monitor LME inventory movements, battery operating rates, end-use demand, domestic prices and secondary lead availability.
Unless physical consumption strengthens meaningfully, inventory tightness is likely to provide support to lead prices rather than trigger a sustained upward move.
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