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Waiting to rebound

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After the sell-off in late-February and early-March, LME lead prices have consolidated in a sideways range, which touched a low of $2,288 per tonne in mid-April. Early February’s multi-year high was $2,685 per tonne. Technically, the consolidation could be a continuation pattern, which would be the precursor to another step lower.

But, fundamentally, we believe lead looks more bullish than that, given low stocks and an underlying market deficit amid restraints on primary supply. In addition, global risk appetite seems to be on the mend, and a stronger tone in zinc lately will be supportive to lead too. The lack of follow-through selling after lead’s drop in February-March suggests that the market is not overly bearish, but sentiment does not seem that bullish yet either. We think that will come once there are fresh signs of fundamental tightness, such as a pick-up in exchange stock withdrawals. In the meantime, good scale-down buying interest should support prices in any further dips.

In this regular section, Metal Bulletin Research’s base metals team summarise their in-depth reports to highlight key factors driving the markets and their short-term price forecasts. The weekly service, Base Metals Market Tracker, provides independent analysis and forecasts for base metals markets and prices.

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