We continue to like lead’s fundamentals, as we have all year. The fact prices have not held down for long highlights bullish sentiment.
Better PMI data of late and robust US, Chinese and EU vehicle sales also bode well for metal demand.
At face value, the combination of an apparent supply surplus and stable-but-higher LME stocks provides little reason to be bullish in the short term. So prices should probably remain capped on the upside until there are more signs of a deficit emerging. But with the other metals extending gains, it is not surprsing that lead is following, especially because we expect a deficit to materialise before long. We would get more comfortable if LME stocks started to fall.
The c-3s spread is not particularly strong at a contango of $13-12.5 per tonne – this does not suggest short-covering. But forward lending suggests forward buying. The 3-15 month spread has averaged $26 per tonne contango so far in November, basis evening evaluations, compared with averages of $23c per tonne in October and $16c per tonne in September.
Lead’s latest rebound is working higher. The break above $2,157 per tonne, the highest since September, and $2,162 per tonne, the highest since May 2015, now targets the lower of the two HRLs on the monthly chart at $2,307 per tonne.