SMM Lead Market Daily Review (2015-8-31)

SHANGHAI, Sept. 1(SMM) – LME market was closed on Monday and thus base metals posted large drops with exit of longs. SHFE 1510 lead dived to RMB 13,420/mt at one point but suffered sell-offs near session’s end, to close at RMB 13,345/mt, down RMB 95/mt. Trading volumes were about 4,302 lots and positions reduced 226 to 16,028.

On Monday, mainstream traded prices were RMB 13,420-13,470/mt for Chengyuan brand in Shnaghai, premiums of RMB 100/mt over SHFE 1510 lead. Humon and Hanjiang brands quoted RMB 13,390/mt, versus RMB 13,350/mt for Shuangyan brand (packed in iron).

Only Shandong Humon Smelting moved goods out. Traders held offers firm and were not active in selling due to limited stocks despite of widening spot premiums. Meanwhile, downstream buyers showed little interest late Aug.

SMM survey of 30 market players shows 17% of them are bullish towards lead prices. China’s A-shares will rally owing to lots of rescuing measures with Beijing’s parade this Thursday. Recently, base metals prices are closely linked with moves in Chinese share market. Thus lead prices should follow up slightly.

Lead smelters in or near Hebei, Tianjin and Henan cut or halt operation on Beijing’s parade. Last Friday, smelters in Henan’s Jiyuan and Anyang were required a 30% cut in production. Production at Henan Yuguang Gold & Lead and Wanyang Group were thus negatively affected. This boosts the expectation for tighter supply. Meanwhile, secondary lead smelters in Tianjin and Hebei almost all shut down, cutting secondary lead supply. This will increase demand for primary lead. As such, LME lead should drift higher to USD 1,740/mt this week and Chinese spot lead will be up to RMB 13,600/mt.

30% industrial insiders are bearish and see SHFE lead to slide to RMB 13,180/mt this week and spot lead to drop to RMB 13,200/mt. SHFE lead outperformed LME lead previously and pushed SHFE/LME lead price ratio up to 8, leaving downside room open for SHFE lead. Some lead-acid battery makers take vacations due to mounting inventories. One large lead battery reports a decline in orders since this month, cutting lead consumption by 10,000-15,000 mt per month, boding ill for lead prices. Leading battery makers lower battery prices again, citing 48v12A battery prices to RMB 290-300 from RMB 330-346 with the largest drop at RMB 46. This depresses operating rate at mid-sized and small battery makers, reducing demand for lead again.

The rest 53% expect LME lead to hover around USD 1,700/mt and spot lead to fluctuate between RMB 13,250-13,400/mt this week. Economic figures should be mixed this week, including different countries’ PMI and US non-farm payrolls. Downstream purchase should be curbed by cash tightness late Aug. and early Sep. As a result, lead prices should hover in current ranges.