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SMM Daily Review – 2011/8/1 Lead Market
Aug 2,2011 09:04CST
smm insight
Source:SMM
domestic lead price movements on August 1st.

SHANGHAI, Aug. 2 (SMM) – SHFE lead prices opened slightly higher at RMB 17,570/mt on Monday. After opening, SHFE lead prices reached briefly RMB 17,660/mt, but later dived and stopped falling after down to RMB 17,600/mt. In the afternoon session, SHFE lead prices kept fluctuating, and edged down at the tail of trading, down as low as RMB 17,530/mt. Finally, SHFE lead prices closed at RMB 17,600/mt, up RMB 60/mt. Trading volumes were down by 1,040 lots to 1,316 lots, and positions were down 408 lots to 5,964 lots on Monday.

SHFE lead prices fluctuated at the daily moving averages on Monday. Markets were taking a cautious attitude as the results of US debt ceiling talks would be released on Tuesday, resulting in limited transactions. Offers for well-known branded lead, including Jinsha and Shuikoushan, were generally in the RMB 17,080-17,120/mt range, with discounts between negative RMB 450-500/mt over SHFE 1109 lead contracts. Offers for other brands, like Jinguan and Hanjiang, were around RMB 17,020/mt. In the afternoon business, trading sentiment failed to improve, and offers were little changed.

With regard to lead price trends this week, 40% market players are optimistic since they are expecting the US will reach an agreement on the debt limit issue. Base metals prices will rise once the US debt limit issue is finally solved on August 2nd. Moreover, although Shaoguan smelter restarted production and had capacity come online, production cuts or stoppage in Henan province have not improved significantly. Hence, supply is decreasing more rapidly than demand, despite that a large number of downstream manufacturers are still out of commission. In this context, domestic lead prices should rise along with LME lead prices, with prices expected to stand at RMB 17,500/mt this week.

46.7% market players are neutral toward lead price trends, seeing lead prices between RMB 17,100-17,300/mt. The market has absorbed gains brought by the positive negotiation on the US debt limit issue, and the market is expecting higher China’s CPI for July, which will strengthen speculations over China’s additional credit tightening policies. Meanwhile, Spain was warned of sovereign credit rating downgrading. In this context, base metal prices will unlikely rise significantly despite the US reaches an agreement on the debt limit issue, and declines in supply and demand in domestic markets will cause lead prices to fluctuate.

The remaining 13.3% are pessimistic. The lists of lead-acid battery enterprises to be supervised are being released, most of which are shut down, and with demand falling significantly. Moreover, the market is cautious as LME lead prices fell the most of all base metals last week. As a result, lead prices will likely move between RMB 16,900-17,100/mt.
 

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