SHANGHAI, Mar. 28 (SMM) -- The Shanghai Futures Exchange formally launched the lead futures trading last Thursday. The SHFE lead 1109 contract price was driven up to RMB 19,570/mt by heavy buying during the morning session, gaining 6.6%. Later, investors shunned risky assets and sold out positions at the high prices. In response, SHFE lead prices fell and then fluctuated between RMB 18,850-19,075/mt, with shorts and longs struggling at RMB 19,000/mt before finally closing at RMB 18,930/mt, up RMB 585/mt or 3.19% from the benchmark price of RMB 18,350/mt.
Prices for well-known branded lead climbed to RMB 18,000/mt due to strong gains in SHFE lead prices, but later fell to RMB 17,800-17,900/mt after SHFE lead prices also fell. Unknown branded lead traded between RMB 17,650-17,750/mt. Some traders which were previously holding goods engaged in profit-taking when lead spot prices were driven up by SHFE lead prices. Other traders taking advantage of hedging showed stronger selling interest for lead spots when SHFE lead prices fell. In general, traders were relatively active on the first trading day of SHFE lead futures trading.
Smelters and downstream producers were quiet. Most lead smelters were optimistic about future market outlook and were in no rush to move goods, with offers made between RMB 17,700-17,900/mt. However, downstream producers resisted high prices since many had already built stocks before the opening of SHFE lead futures trading. Resistance to high prices, coupled with unclear SHFE lead futures trends, caused many downstream producers to stay out of the market, keeping overall trading sentiment muted.
SMM expects downstream producers will largely stay out of the market in the short term if SHFE lead prices remain near RMB 18,000/mt.
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