SMM Daily Review - 2011/9/13 Lead Market

SHAGNHAI, Sept. 14 (SMM) -- On Tuesday, SHFE lead prices opened lower at RMB 16,600/mt, then inched down tracking domestic stocks markets, with prices stabilizing to move between RMB 16,400-16,460/mt later the day. In the afternoon, SHFE lead prices found support at RMB 16,480/mt, but fell further at the end of trading, closing at RMB 16,420/mt, down RMB 180/mt, or down 1%. Trading volumes decreased by 140 lots to 396 lots, and total positions decreased by 128 lots to 3,350 lots.

In domestic spot markets, well-known brands such as Nanfang and Chihong Zn & Ge were quoted between RMB 16,220-16,250/mt, with discounts narrowing to negative RMB 200-250/mt against SHFE 1110 lead contract prices. Other brands such as Hanjiang and Chengyuan were quoted between RMB 16,150-16,200/mt. Traders were moving goods modestly, while downstream buyer were cautious, believing prices will fall, leaving transactions quiet.

With regard to lead price trends this week, 60% market players are pessimistic, believing lead prices will fall to RMB 16,000/mt due to ongoing European debt crisis, and as the G7 summit failed to make any substantive progress, dragging down stocks markets. Besides, the US dollar hit a record high at 77.784 given improving risk aversion sentiment.

33.3% of insiders believe lead prices will fluctuate between RMB 16,100-16,300/mt due to a lack of support. Besides, smelters are holding goods, while downstream demand will improve.

The remaining 6.7% are optimistic. Lead ingot inventories in Shanghai fell further by 6,000 mt after a drop of 4,000 mt the previous week, a signal of strong demand. LME inventories also fell, with premiums of USD 18/mt, both pushing up lead prices.