[Pb Price]SMM Lead Market Daily Review (2015-8-3)

SHANGHAI, Aug. 4 (SMM) – The most active contract fluctuated between RMB 12,950-13,000/mt on Monday and finished the day at RMB 12,850/mt, falling RMB 165/mt on sell-offs. Trading volumes totaled 3,454 lots and positions increased 342 to 17,236.

Nanfang brand settled RMB 270/mt higher than SHFE 1510 lead at RMB 13,270/mt in Shanghai. Traded prices were RMB 13,220-13,230/mt for Humon, YT and Jinyuteng brands, versus RMB 13,150/mt for Shuangyan brand (packed in iron).

Only Shandong Humon Smelting Co. moved goods and market mainly was full of goods from traders. Downstream buyers increased purchase slightly early August. But base metals were depressed as a whole and thus downstream producers majorly watched from the sidelines.

SMM surveyed 30 industrial insiders to find that 30% of them see LME lead prices to fall to USD 1,680/mt this week and China spot lead prices to RMB 12,850/mt. On the macro side, most data from US are below forecast, but US economy posts a real improvement, depressing lead prices. This Friday will witness US July’s unemployment rate and non-farm payrolls. Markets expect the former to hold flat June’s 5.3% and the latter to be 225,000, above June’s 223,000, boding well for US dollar. Moreover, US active oil rigs grew 5 last week, hitting a three-month high. As such, investors worry that growth in US crude oil output will weigh on oil prices, which will also weaken investors’ confidence in commodity market.

China official manufacturing PMI for July comes in at 50, below forecast. Caixin’s manufacturing PMI, released previously, falls to a 15-month low, below 50 for five straight months. Markets expect additional stimulus measures, but China’s soft economy will be hard to drive lead prices up.

As for spot supply, Hunan’s Jingui Silver Industry, Zhuzhou Smelter Group, Yuteng Nonferrous Metals, Jinli Lead, Wanyang Group and Chifeng Shanjin Silver & Lead will restart operation in August. Besides, lead-acid batteries went a peak season in August, after which rising scrap batteries will send secondary lead supply up. Secondary lead with price edges will curb the growth in primary lead prices.

Sales for e-bike and auto stay weak currently. Downstream lead-acid battery makers will still buy raw materials on need. As such, lead prices should post declines this week.

17% respondents believe that LME lead prices will break out above USD 1,715/mt this week and that China spot lead will grow to RMB 13,300-13,400/mt. Large price hikes in batteries will drive operating rate up at battery makers in August. High temperatures will accelerate battery replacement. Both factors help to increase demand for refined lead.

Secondary lead smelters in Beijing, Tianjin and Hebei will cut or even halt production due to the military parade in Beijing. Consequently, lead-acid battery makers may buy more primary lead with shortfalls in secondary lead. Market players pose high expectation for the peak season of batteries in August.

The rest 53% note that LME lead prices will hold flat between USD 1,690-1,720/mt this week and RMB 12,850-13,100/mt for spot lead. Increasing supply will be offset by the expectation for rising demand in peak season.

Economic indicators may come disappointingly but high temperatures will quicken battery replacement. SHFE 1510 lead finds solid support below but also meet resistance at the 20 and 40-day moving averages. So SHFE lead should fluctuate in current ranges.