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SMM Daily Review - 2011/12/12 Lead Market
Dec 13,2011 09:36CST
smm insight
On Monday, SHFE lead prices opened RMB 100/mt higher at RMB 15,730/mt and moved between RMB 15,650-15,670/mt.

SHANGHAI, Dec. 13 (SMM) – On Monday, SHFE lead prices opened RMB 100/mt higher at RMB 15,730/mt and moved between RMB 15,650-15,670/mt. In the afternoon, SHFE lead prices dropped briefly to RMB 15,590/mt but gained support at the 10-day moving average, and moved around RMB 15,630/mt. Prices finally closed at RMB 15,660/mt. With strong cautious sentiment among investors, trading volumes only decreased by 6 lots to 272 lots, and positions decreased by 46 lots to 1,946 lots.

In domestic spot markets, quotations for domestic well-known brands such as Nanfang, Chihong Zn & Ge and Chengyuan were around RMB 15,650/mt, with discounts against the most active SHFE lead prices of negative RMB 0-20/mt. Other brands such as Yunyue were traded at RMB 15,600/mt. In the afternoon, lead prices were stable. Downstream buyers remained cautious and only purchased on an as-needed basis, while smelters were still unwilling to sell goods. Transactions were quiet on the whole.

With regard to lead price trends for the week, 33% insiders are optimistic, believing prices should rebound due to good news, but with increases limited. SHFE lead prices are expected to touch RMB 16,000/mt as China’s CPI and PPI released last Friday fell, a signal of easing inflation and loosening domestic monetary policies. The EU summit resulted in a financial agreement of its member countries except for UK, boosting market confidence. Besides, LME lead inventories continued to fall since early December by 8,125 mt, to 361,700 mt. Canceled warrants surged from 25,000 mt in late November, to 45,000 mt. In domestic spot markets, smelters were still unwilling to sell goods, so goods supply available in the market is tight. In this context, lead prices should find support.

40% market players believe lead prices will hover between the 5-day and 10-day moving averages, close to last week’s levels. Despite progress in the EU summit, the critical problem regarding issuing unified bonds in the eurozone was not even mentioned, thus, the results may not greatly influence the market. Besides, in spot markets, smelters are not willing to move goods due to low lead prices, and downstream consumption is still depressed influenced by the warmer winter. Therefore, lead prices will struggle due to weak supply and demand.

The remaining 27% are pessimistic, thinking the result of EU summit was still worse than expected. Downstream producers will still suffer environmental protection inspections, with profit margins significantly contracted, combined with weak demand, cash flow problems exacerbate by year’s end. In this context, more downstream enterprises stated they will purchase on an as-needed basis, so SHFE lead prices will likely fall to RMB 15,350/mt.

SHFE lead prices
spot lead
lead price trends

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