SHANGHAI, Aug. 9 (SMM) – SHFE 1110 lead contract became the most actively-traded contract on Monday. Positions for SHFE 1109 lead contract were down 614 lots to 3,618 lots, while positions for SHFE 1110 lead contract were down 6 lots to 4,170 lots. SHFE lead prices opened Monday at prices below RMB 16,075/mt, and then fell to RMB 15,580/mt, a new low since its launch. In the afternoon session, SHFE lead prices gradually rallied, and rebounded to RMB 16,270/mt. With the bearish sentiment, SHFE lead prices finally closed at RMB 16,250/mt, down RMB 100/mt. Trading volumes were slightly up by 158 lots to 3,136 lots.
Despite a rally after reaching a low level in the SHFE lead market, offers of domestic well-known branded goods, Chihong Zn&Ge, were between RMB 15,800-15,900/mt. Spot discounts over SHFE 1109 lead contract narrowed to negative RMB 250-270/mt. On Monday, offers were sparsely heard for other brands, such as Jinguan and Baiyin. Traders took a wait-and-see attitude, and moved goods cautiously, while downstream producers did not make purchases despite lower prices, resulting in moderate transactions. In the afternoon business, offers for Chihong Zn&Ge were generally at around RMB 15,820/mt. Downstream purchasing interest improved, and transactions turned better slightly.
According to an SMM survey of price outlook, around 26.7% market players are pessimistic, believing that the downgrading of US credit rating will plague the market. Speculations that further credit tightening policies will be taken if China’s CPI for July is still high will further weigh on the market. In this context, LME lead market will weaken, and domestic lead prices will drop below RMB 16,000/mt, with prices to move between RMB 15,800-16,000/mt.
Approximately 53.3% of market players believe that domestic lead prices will hold at RMB 16,000/mt. After sharp declines last week, bearish sentiment remained strong, but LME lead prices were near to this year’s low, and domestic lead smelters will likely enter the market, which will support lead prices. In domestic market, production at smelters in Henan province hasn’t fully resumed, and the pressure remains despite the release of results of environmental protection inspections. The struggle between supply and demand will allow domestic lead prices to move around RMB 16,000/mt.
The remaining 20% are optimistic, believing LME lead prices will rebound as the round of losses are technically overdone. LME lead prices will be supported as smelters will make purchases at around USD 230/mt. The existing domestic lead prices at below RMB 16,000/mt are already below costs both for primary and secondary lead smelters. Smelters will not move goods due to low prices, and market supply will drop as a result. The approach of a high demand period, e-bike battery in particular, the restart of downstream producers after inspections from rising battery prices and lower lead prices will help domestic lead prices rally to RMB 16300/mt.