SMM Lead Market Daily Review (2015-9-14)

SHANGHAI, Sept. 15 (SMM) – SHFE lead once rebounded to RMB 13,350/mt after the open of Monday trading session but then drifted down to RMB 13,290/mt as Chinese shares dropped after the start of Monday session. The price finally finished RMB 155/mt lower at RMB 13,240/mt. Trading volumes totaled 3,756 lots with positions down 376 to 14,714.

On Monday, Nanfang brand quoted RMB 130/mt above SHFE 1511 lead at RMB 13,420-13,430/mt. Traded prices were RMB 13,380-13,400/mt for Humon, Mengzi and Hanjiang brands, compared with RMB 13,370/mt for Shuangyan brand (packed in iron).

Hechi Nanfang Nonferrous Metals Group moved a small portion of goods out. Other brand lead smelters lowered ex-works prices by RMB 20/mt due to lower SMM #1 lead average price. Wait-and-see sentiment loomed downstream market after the drop in SHFE lead prices and thus transaction muted in market.

SMM survey of 30 market players showed that 40% of them are bearish towards lead prices. They expect LME lead to fall below USD 1,670/mt this week and SHFE 1511 lead to test support at RMB 13,000/mt. On the supply side, Yunnan Zhenxing Industry Group will put online 100,000 mt of crude lead. Operating rates at other lead smelters also improve modestly in Yunnan, increasing local supply. Healthy supply in Guangdong, Hunan and Jiangxi will depress lead prices.

In terms of demand, auto output decreased 0.24% YoY during Jan.-Aug. with sales staying flat, cutting demand for lead in auto sectors. Moreover, some lead-acid battery makers register a slip in orders since this month. Some mid-sized and small motive battery makers plan to cut production as a result of huge inventories and poor consumption. Technically, SHFE lead face great sell-off pressures at RMB 13,400/mt. As such, lead prices should fall back this week.

Around 7% industrial insiders note that LME lead will increase above the 40-day moving average this week and SHFE lead sill test resistance at RMB 13,400/mt. They cite tight supply in secondary lead and the Sept.-Oct. peak demand season as the main reasons. Anhui Huaxin Lead Industry Group, China’s largest secondary lead smelter, idles its old furnace with production of new furnaces staying unsteady. This decreases secondary lead supply. Irregular lead smelters in Hebei and Shandong shut down owing to light profits and environmental protection crackdowns. Besides, parts of market players are still expected demand to be boosted in Sept.-Oct. despite current weak demand.

The remaining 53% respondents see LME lead prices to be flat at USD 1,665-1,715/mt this week and spot lead to be flat at RMB 13,300-13,450/mt. Market sentiment will keep wary before the US Fed’s meeting on Friday. Considering the above favorable and unfavorable news, investors believe that lead prices will resist both increases and declines.