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Analysis
But this will prove fairly challenging given the current macro-economic backdrop and LME lead’s very own fundamentals that are not price-supportive. Rising unemployment levels, the loss of income and the prospect of a global economic downturn (with the rising prospect of trade and political disputes between the United States and China) are all likely to persist in 2020. The economic damage and uncertainty is set to change consumer behavior in the post-Covid-19 era. Although supply disruptions have been price supportive in the short term, the automotive industry continues to face a sharp decline in demand. IHSmarket now forecasts global light vehicle sales to plummet by 22% to 70.3 million units in 2020. The automotive sector outside China remains challenging. Demand destruction in auto sales, due to the global health crisis, is emerging. Japan’s largest carmaker, Toyota, recently said it expects to sell 7 million units this year, down from last year's 9 million units, for example. With fewer cars on the road, demand for lead-acid batteries will decline too. BloombergNEF (BNEF) now forecasts registrations for combustion engine cars to drop by 23% in 2020 because the global lockdown has disrupted sales and undermined consumer confidence. Conclusion Despite the positive break above the DTL off the October 2019 high DTL, interest in pushing LME lead higher remains tepid. A false start to the upside pushed the price lower again although the dips remain bought. With no clear conviction from either buyers and sellers, we envisage more sideways trading in the coming days..
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All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.