Short term 
Medium term
Long term (12M): Up
R1 1,964 20 DMA
R2 1,964 40 DMA  
R3 1,978 DTL from Jul 12
R4 2,187 200 DMA
R5 2,241 May 2018 double bottom
R6 2,620 Oct 4 high
S1 2,311 Mar 2018 low
S2 2,241 May 2018 low
S3 2,187 200 DMA
S4 2,139.50 Jul 12 2018 low
S5 1,964 20 DMA
S6 1917.50 Aug 15 low

 Rolled lower

BB – Bollinger band
DMA - Daily moving average
HSL – horizontal support line
SL – support line
MACD – moving average convergence divergence
DTL – downtrend line
UTL – uptrend line
H&S – head-and-shoulder pattern
RSI – relative strength index

  • The London Metal Exchange three-month lead price opened in a weak tone on Friday December 14, edging below support from the 20 DMA at $1,964 per tonne.
  • Momentum indicators have rolled lower. The stochastics are trending lower although the fast line has stalled; the RSI remains neutral overall at 45.
  • Further resistance is expected from the overhanging DTL resistance formed since mid-July, although clearance would open the way to target the October 15 high at $2,116 ahead of the 200 DMA at $2,192 per tonne.
  • Having failed to hold above the 20 DMA, support is now seen from the UTL from the October 11 low, currently at $1,925  ahead of the October low at $1,876 per tonne. Lead also continues to form what appears to be a symmetrical triangle - we have a downside target of $1,719 per tonne based on this. 
Macro drivers
LME lead stocks totaled 106,100 tonnes on December 14, down from 133,475 tonnes on June 1. Pockets of fresh cancelations remain supportive although only 14.2% of stocks are booked for removal, down from 42% on October 2, following a large rewarranting. The LME’s cash/three-month spread has gradually tightened - it was most recently in a contango of $6.50 per tonne, in from $24 per tonne on November 27, which could suggest an element of short-covering recently. But tighter spreads could trigger further stock inflows.

In China, Shanghai Futures Exchange stocks totaled 16,845 tonnes on December 14, up slightly from a multi-month low of 6,139 tonnes on October 26. Smelters are likely to lift their utilization rates following the end of environmental inspections but growth in refined lead production will remain limited by emission restrictions during the winter-heating period and while economic sanctions compound the already tight availability of raw materials.

Data continues to point toward slowing momentum in global vehicle sales. The latest figures showed passenger-vehicle sales in the European Union dropped 8% year on year in November. Sales stand up by only 0.8% year on year in the first 11 months of the year.

In the physical market, premium were little changed across the past week amid limited spot interest. Meanwhile, Fastmarkets understands some 2019 annual supply deals have been agreed around $70 per tonne, with participants seeking supplies from Africa and Russia given that Iranian material will be excluded due to sanctions. 

The supply response in zinc has provided little in the way of additional lead concentrate supplies while miners struggle with low grades and environmental inspections in China. Global mine production declined by 0.9% year on year in January-September 2018, according to International Lead & Zinc Study Group (ILZSG) estimates. Spot treatment charges (TCs) continue to reflect the tight availability.

The fundamentals in the refined lead market are set to remain supportive in 2018-2019, according to a forecast by the ILZSG, which expects the market to record a 123,000-tonne deficit in 2018 and a further 17,000-tonne shortfall in 2019. The ILZSG pegged the refined lead market in a deficit of 110,000 tonnes in January-September 2018.

The latest commitments of traders (COT) data showed net length among LME investment funds increased by 115 lots in the week to December 7, but at -2,019 lots there remains ample room for further short covering given that open shorts remain elevated.


Despite tight availability, slowing global vehicle sales and macroeconomic drivers continue to act as a drag. Having stalled at overhanging DTL resistance around $1,985 per tonne, prices have rolled lower and are in danger of retesting recent lows and potentially extending lower.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.