SMM Daily Review - 2011/8/22 Lead Market

SHANGHAI, Aug. 23 (SMM) -- SHFE lead prices moved around the daily moving average after opening higher at RMB 16,680/mt in the morning session on Monday, but the falling stock markets in the afternoon session dragged down SHFE lead prices to RMB 16,600/mt. Later SHFE lead prices rallied to RMB 16,650/mt, but fell back again and finally closed at RMB 16,605/mt, up RMB 60/mt, with support found at the 5-day moving average. Short investors were more active than long ones, a signal of cautious market sentiment. Trading volumes were down 594 lots to 1,268 lots, and positions were down 92 lots to 4,206 lots on Monday.

SHFE lead prices were stable after opening up over RMB 100/mt, helping boost domestic spot lead prices. Spot discounts were negative RMB 380-450/mt against SHFE 1110 lead contract prices. Offers for well-known branded lead like Chihong Zn&Ge, Chengyuan and Nanfang were RMB 16,300/mt, but almost no deals were made at high prices, while offers for other brands like Hanjiang and Tianma were between RMB 16,180-16,200/mt. Lead prices climbed, but stock and other surrounding markets remained weak, and the wait-and-see sentiment was dominant, resulting in limited trading volumes. SHFE lead prices declined following stock markets, and prices for well-known branded lead like Chihong Zn&Ge, Chengyuan and Nanfang were down to RMB 16,250/mt, with discounts of negative RMB 400/mt against SHFE 1110 lead contract prices, but offers for other brands remained firm between RMB 16,180-16,200/mt, with trading sentiment remaining lackluster.  

With regard to lead price trends this week, 67% of market players believe lead prices should fluctuate around RMB 16,300/mt. LME lead prices struggled at the USD 2,300/mt level last Friday, finding support at USD 2,280/mt. The market will remain cautious as U.S. banks JP Morgan Chase and Citigroup have significantly lowered their forecasts of US economic growth, and due to concerns over global economic recovery on falling US stocks, weighing down LME lead prices. In domestic markets, SHFE 1110 lead contract prices stabilized at RMB 16,400/mt despite plunging LME lead prices last weekend. Spot prices also found support at the RMB 16,000/mt level, but with transactions lower at RMB 16,300/mt, which was also attributed to sufficient stocks at downstream buyers. Both the rising lead prices and weakening transactions will further drag down SHFE lead prices.

The remaining 33% were optimistic, believing LME lead prices will fluctuate to rise this week. Bernanke’s statement this weekend will be a focus of markets, with the expectation QE3 policy announcement will boost market confidence, pushing up LME lead prices. Domestically, lead prices should remain low, while smelters will be mainly holding goods. Transactions of refined lead will improve based on rising SHFE lead prices, and spot lead prices should surge to RMB 16,500/mt.