Analysis of Lead Price Surge by Kaiying Power

In 2024, lead prices experienced a significant surge, reaching a six-year high. This article aims to analyze the multiple reasons behind this rise and explore the economic and market factors contributing to it.

Macroeconomic Factors

- Inflation Expectations: Inflation expectations in the macroeconomic environment are one of the key factors driving up lead prices. As market concerns about inflation intensify, investors seek safe-haven assets, and lead, as an industrial metal, naturally sees its price boosted.

- Financial Attributes: Lead has financial attributes, and its price is closely related to macroeconomic indicators. Following the rise of other base metals like copper, lead, as a relatively lower-priced commodity, attracted investor attention.

Supply and Demand

- Tight Supply: Limited battery recycling during the off-season led to a tight supply of lead concentrate. Additionally, the implementation of new national standards required primary lead smelters to undergo technological upgrades, increasing production costs and further constraining supply.

- Stable Demand: Despite being in a low-demand season, the high inventory levels in the lead-acid battery industry chain indicate stable market demand.

Policy Impact

- New National Standards: The implementation of new national standards requiring lead smelters to improve product quality has not only increased production costs but also indirectly pushed up lead prices.

- Reverse Invoicing: Changes in tax policies led battery recycling companies to adopt a wait-and-see approach or to stop issuing invoices in the short term, resulting in a tight supply of recycled batteries and further driving up lead prices.

- Trade-in Policies: Government subsidies for trade-in policies stimulated market demand, especially in the automotive and electric bicycle sectors, providing additional upward momentum for lead prices.

 Market Sentiment

- Capital Flows: Inflows and outflows of market capital directly impact lead prices. During the price surge, capital inflows pushed prices higher.

- Primary vs. Recycled Lead Price Spread: The widening price spread between primary and recycled lead reflects the tight supply of primary lead compared to recycled lead, supporting high lead prices.

Conclusion

The rise in lead prices results from a combination of factors. Inflation expectations in the macroeconomic environment, tight supply and demand dynamics, policy changes, and market sentiment fluctuations all contributed to the increase. Looking ahead, while lead prices may remain high in the short term, they are likely to face new adjustments as supply-demand imbalances ease and macroeconomic conditions evolve.