The Lead Price: Volatile But Holding Well

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Lead prices have had huge up and down swings lately, but lead has managed to hold its value well this year. Last week, the metal hit an 8-month high.

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All base metals are up since the year started. Metals such as tin and zinc have made significant gains so far this year while aluminum, copper and nickel are also making some progress.

3M LME lead price

3-month London Metal Exchange lead price. Source: FastMarkets.

Although lead nose-dived at the beginning of January, prices have made a nice comeback since. But price rallies like this have been usual in previous years only to then be erased as prices trend lower. It will be interesting to see if lead prices can hold above these levels.

January data showed that total vehicle sales in China rose 7.7% from a year earlier. Although the growth looks good, it might shrink in the coming months as China’s weak economic situation could hurt consumer confidence. In the US, auto sales were mixed in January. The number of cars sold was  flat compared to the same month last year, although analysts attribute lower sales to fewer selling days this January and a particularly cold month in the populous northeast.

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Although these numbers are relevant, lead’s resilience this year is mostly attributed to a weaker dollar. Not only lead, but most base metals have made some upside progress over the past few weeks after suffering significant declines in 2015:

  • Aluminum just hit a four-month high
  • Copper is at a four-month high
  • Zinc is at a four-month high
  • Tin just hit an eleven-month high

Bull Moves?

Buyers should keep an eye on the recent strength in industrial metals. We have not yet found out whether this is really just another dead cat bounce or something more meaningful. The outcome will most likely depend on whether the bearish sentiment in China eases or not. Recently, the People’s Bank lowered the amount of deposits that banks must hold in reserve by 0.5 of a percentage point, which seems like another unsuccessful attempt to boost the economy.

Shanghai Composite index hovening near lows

Shanghai Composite index hovering near record lows. Source:

For this rally in the metal complex to be extended, investors will probably need to become more optimistic about China. The country’s stock market doesn’t show any signs of that happening yet. Equity shares stabilized in February butt they’re just hovering near record lows. Similarly, oil prices stabilized, but are still far from starting a new, positive trend.

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