It was a manic Monday in the metals complex last week as most of the metals fell to multi-year lows. The London Metal Exchange’s (LME) Metal Index declined to its six-year low of 2,097.4. Aluminium and copper also tumbled to their six-year lows. The worst hit among them all was nickel, which tanked to a 12-year low of $8,154 per tonne.

Fears about a surprise Fed rate hike, due to an unscheduled meeting, added to concerns about China, and undermined all metals. However, panic prevailed only for one day and metals have managed to reverse sharply higher thereafter to recover their losses.

Lead prices also followed the other metals and fell to a six-year low of $1,554 per tonne on Monday last week.

Prices recovered thereafter and are currently trading at $1,617. The metal had recorded a high of $2,142 in May and has been in a strong downtrend since then. Like with other metals, China is the major cause for the fall in lead prices. It is the largest producer and consumer of this metal.

According to the latest data from the International Lead and Zinc Study Group (ILZSG), the lead output in China has dropped 14.2 per cent this year until September while the demand fell by 13.7 per cent.

Sluggish output and weak demand for e-bikes had trimmed Chinese demand for the metal. The e-bike segment accounts for about one-third of China’s total refined lead usage.

Lead prices will get a breather only on a strong revival in Chinese consumption.

But the weak economic data releases from China suggest that a revival is not on the cards, immediately.

The recovery in lead prices witnessed after Monday’s fall could be short-lived and the metal price may resume its downtrend, going forward.

On the domestic front, the lead futures contract traded on the Multi Commodity Exchange (MCX) moves in tandem with the LME price. The contract fell to a three-year low of ₹102.5 per kg last week on Monday and reversed sharply higher from there to a high of ₹109.8 on Thursday.

The contract has closed the week at ₹108. A weak rupee has also supported the reversal in the contract along with the recovery in global prices. There is room left for the domestic contract to extend its rally in the short term, while the broader trend still remains weak.

Short-term view The 3 per cent rally last week has given temporary relief to the contract. The key support for the contract is at ₹105.

There is no danger of an immediate fall as long as it trades above this support level. Immediate resistance is at ₹111 — the 21-week moving average.

A strong break above this level can increase the momentum and take the contract higher to ₹115 or ₹118 in the short term. Strong resistance is present in the ₹118-120 zone.

The contract will need a strong break above this resistance in order to wipe out downside pressure completely.

But such a strong break looks improbable. The contract is more likely to reverse lower after this short-term rally.

The contract will come under pressure if it records a decisive close below ₹105. In such a scenario, it could fall to ₹100.

Medium-term view The trend is down. But there are two key medium-term support levels coming up, first at ₹100, a trendline support and then at ₹98 — the 50 per cent Fibonacci retracement support level.

A test of these support levels in the coming weeks cannot be ruled out.

However, whether the contract reverses higher from ₹100-97 levels or breaks below will decide the next leg of move. A strong reversal will have the potential to take the contract back to ₹115 and ₹120 levels.

But a break below ₹97 will increase the danger of the contract falling to ₹93 and ₹91.

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