However, the positive economic recovery in US along with increased Chinese buying at low levels after Chinese New Year holidays supported the prices in initial week of the month. Furthermore the falling demand for lead from battery makers has also weakened the prices as battery industry accounts for 71% of the lead demand worldwide and the prospects of the metal are closely linked to it.
On the supply side, however production is expected to rise slightly from China, a major Lead producer on resuming operation in few plants on fresh power supply, but global supply is still disruption prone and are very much constrained. However, the intact long term demand prospects on improving pace of global economic recovery may support the positive price sentiments.
Investors may take cues from the development on Middle East crisis and the pace of US economic recovery. Elsewhere China, a major metal consumer tightened its monetary policy, twice in the month to fight against stubborn inflation. It first increased interest rates by 25 bps and then later raised reserve requirement ratio for banks by 50 bps.
China’s commitment to curb heavy metal pollution also needs investor’s attention as regulators may take step to put pressure on leadacid battery manufacturing and lead smelting. We expect the prices to remain in a range as the metal will be under pressure due to rising inflationary clouds and Middle East crisis.
Lead remained volatile in February with the market unable to showcase any clear direction. The metal failed to take off January’s high as it seemed uncomfortable sustaining above Rs.120/kg mark on MCX. It appears that lead is being well supported by the bullish sentiment prevailing in copper & nickel but does not have any inherent strength to surge towards fresh highs.
Hence one can conclude that any price correction in base metals space in the near future should see lead prices tumbling the most. Traders are advised to sell the metal at/near resistance levels for the month ahead.