Although there is two-way pressure, the bulls are clearly winning despite the challenge posed by the weakening of the global automotive sector, an uncertain macroeconomic backdrop and the long-term shift away from the traditional lead-acid batteries to lithium-ion technology.
Underlying demand for LME lead continues to disappoint. Despite government guidelines in China intended to boost domestic consumption, total vehicle sales contracted for a 15th consecutive month in September, down by 5.2% year on year, China Association of Automobile Manufacturers (CAAM) data shows.
European Union (EU) passenger car market contracted by 8.4% in August following an increase of 1.4% in July. For the first eight months of 2019, passenger car registrations in the region contracted by 3.2%, suggesting a lack of buying appetite for big-ticket items.
US auto sales will dip by 13.3% in September from a year earlier, according to JD Power and LMC Automotive statistics, to 1.24 million units. Both consultancies now expect sales for the whole of 2019 to down by 1.3% from 2018.
But LME fund managers have turned and remain positive. LME lead's net long fund position (NLFP) stood at 6,815 lots as of October 11, a significant shift from a net short fund position of 6,255 lots on May 24. Further evidence is in the month-on-month changes, where gross longs have expanded their bullish exposure by 5,435 lots while gross shorts only added 1,856 lots.
LME lead still has a relatively robust fundamental backdrop. There is a lack of clarity about the impact of unplanned supply disruptions - at Nyrstar's Port Pirie and most recently a blockage at major zinc-lead Peñasquito mine in Chile, which could easily swell this year's global deficit in refined lead. Over January-July, the deficit rose to 47,000 tonnes from last year's 35,000 tonnes, according to the International Lead and Zinc Study Group (ILZSG).
LME lead is still rising slowly - aggressive selling has yet to emerge. Price-supportive speculative funds positioning and its robust fundamental backdrop are keeping the metal elevated for now.
All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.