Global lead short-term outlook July 2023

The late-July rally in SHFE prices to their highest level since December has attracted attention. However, LME prices remain relatively stronger. Indeed, the LME/SHFE arbitrage in June was on a par with December's, and trade data now show that this coincided with another wave of Chinese refined exports in June. While the SHFE's price rallied in July, the LME's did as well, albeit from a higher relative base. The arbitrage has therefore narrowed. Peñasquito's strike continues to contribute to firm lead markets, with a tight concentrate market meaning that refined supply will be curtailed because smelters are unlikely to replace lost feed. It's supportive of refined prices generally, while the narrower arbitrage points to less relative weakness in China.