SHANGHAI, Jul 2 (SMM) – Fundamentals will continue to weigh on Shanghai lead prices in July as production recovery outweighs the impact of environmental probes. The low season will also exacerbate a supply glut.
US-Sino trade negotiations are likely to offer some support to prices.
The most-active SHFE August contract advanced to a high of 16,300 yuan/mt in the morning session of Tuesday July 2, after ended up 1.53% at 16,275 yuan/mt on Monday, driven by the resumption of US-China trade talks. The 16,000 yuan/mt level provided strong support.
Restarted smelters of primary and secondary lead, as well as new capacity of secondary lead, will generate output in July. This is expected to bolster supplies by 10,000 mt from a month ago, according to SMM preliminary estimates.
The new round of nationwide environmental probes will underpin prices of lead, but it is unlikely to resolve the market surplus.
Lead consumption shows no signs of a pick-up. High inventories of finished products are likely to expand production cuts across downstream producers of lead-acid batteries this month.
SMM does not expect Shanghai lead prices to exceed the 16,500 yuan/mt level, and to hover between 15,800-16,350 yuan/mt in July.
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