Equity markets made a mixed start on Friday after authorities tightened oversight on online financial service platforms while the latest manufacturing data missed consensus expectations.
LME warehouse lead stocks totaled 110,850 tonnes on April 30, down from a recent peak of 124,950 tonnes on March 15, following a spate of inflows. After fresh cancellations recently, 18.4% of stock is now booked for removal.
Shanghai Futures Exchange lead stocks totaled 61,044 tonnes on April 30 compared with a recent low of 36,994 tonnes. Growing seasonal scrap supply will allow secondary smelters to raise their capacity utilization rates.
In the physical market, lead premiums in the United States remain supported at multi-year highs, with rebounding activity in the automotive sector and the closure of a Clarios battery recycling center in Florence tightening availability. Local premiums could face further upside pressure amid concerns surrounding the Gopher Resource Tampa plant, where the Occupational Safety and Health Administration has began an inspection for the first time in five years.
Despite short-term headwinds, light-vehicle sales in the US accelerated to an annualized 18.5 million vehicles in April, the strongest pace since September 2017, according to consultancy Ward's Intelligence. Consultancy LMC Automotive forecasts global light vehicle sales could increase to 86 million vehicles in 2021 from an estimated 77 million vehicles in 2020, although this is still below the 90 million vehicles sold in 2019.
Still, the lack of price traction relative to the rest of the base metals reflects concerns about the impact of rising penetration by new-energy vehicles. Boston Consulting projects EVs will account for more than half of light vehicles sold across the globe by 2026. Despite the shift in vehicle powertrains, new energy vehicles will still require lead-acid batteries to power the vehicle's electrical systems.
Preliminary estimates from the International Lead and Zinc Study Group (ILZSG) put the refined lead market in a 30,000-tonne surplus in January-February 2021, in from a sizable 172,000-tonne surplus overall in 2020. And while we forecast demand from end-use sectors will rebound through 2021, we also expect higher lead production - we expect the market to record an 80,000-tonne surplus in 2021.
Bullish sentiment across the complex continues to drives lead prices towards the February 22 high at $2,185 per tonne. Resistance is seen at the October 2019 high at $2,265 per tonne although lead's ability to extend towards this may be limited while the market moves into a period of slower seasonal demand from the automotive sector and while rising scrap supplies allow secondary smelters to raise their capacity utilization rates.