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SMM Daily Review - 2011/10/17 Lead Market
Oct 18,2011 10:21CST
price review forecast
Source:SMM
With regard to lead price trends this week, 40% of market players are optimistic, believing SHFE lead prices should rebound slightly to move between RMB 15,000-15,500/mt.

SHANGHAI, Oct. 18 (SMM) -- SHFE lead prices moved around RMB 15,070/mt after opening at RMB 15,090/mt on Monday. SHFE lead prices fluctuated lower to between RMB 14,970-15,000/mt in the afternoon session as domestic stock markets weakened, but later brisk buying by long investors helped push up SHFE lead prices at the end of trading, with prices finally closing at RMB 15,040/mt, down RMB 45/mt. Trading volumes decreased by 284 lots to 492 lots, while positions fell by 210 lots to 1,706 lots.

As SHFE lead prices moved around the daily moving average in morning trading, quotations for domestic well-known branded lead like Nanfang, Chihong Zn & Ge and Chengyuan were between RMB 15,050-15,070/mt, with zero discounts against SHFE 1111 lead contract prices. Quotations for other brands like Hanjiang were about RMB 14,950/mt. As SHFE lead prices were little changed in afternoon trading, spot lead prices remained near RMB 15,050/mt. Recently, eased pressure from macro economic conditions allowed smelters to be optimistic toward future lead prices, combined with unit maintenance and production cuts at smelters, traders said recent supply of refined lead declined. Downstream producers have made purchases when lead prices were below RMB 15,000/mt, so they chose to stand on the sidelines on Monday.

With regard to lead price trends this week, 40% of market players are optimistic, believing SHFE lead prices should rebound slightly to move between RMB 15,000-15,500/mt. The opinion was based on the new bailout plan released at the G20 summit, US retail sales MoM increases in September, which was the largest in 7 months, and China’s inflation mitigating in September. Besides, smelters are still unwilling to sell goods, and operating rates dropped, causing lead supply to decrease. Downstream buyers increased purchases at lower prices, which are well supporting lead prices.

33% market players are cautious towards lead price trends, believing SHFE lead prices should move between RMB 14,800-15,300/mt. Despite improving European and US macroeconomic data, European debt crisis is still underway. The focus of markets is now weather the expansion of EFSF from EUR 440 billion to EUR 2 trillion, and the feasibility of other plans. Many smelters cut output or conducted maintenance at present, so the decreasing lead supply will well support lead prices. But as the seasonal high demand period for lead-acid batteries used in electric bicycles has passed, and due to the battery price cut of 6-10%, downstream buying interest weakened, so domestic spot lead prices should struggle at RMB 15,000/mt level.

The remaining 27% believe lead prices will fall further, moving between RMB 14,400-14,800/mt. European debt crisis will unlikely be resolved due to limited financial capabilities of global major economies. LME inventories had grown by 15,075 mt since September 30th by last Friday. Downstream purchasing will be quiet this week as the seasonal high demand period has passed in advance and since downstream buyers had built stocks at lower prices previously, despite smelters suspending production for maintenance.

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