SMM Daily Review - 2012/6/4 Lead Market

SHANGHAI, Jun. 5 (SMM) – On Monday, SHFE lead prices opened RMB 80/mt lower at RMB 15,000/mt due to disappointing economic data released last Friday. Since LME was closed for holiday, SHFE lead prices were largely influenced by domestic stocks. In the afternoon, SHFE lead prices fluctuated down to hit a low of RMB 14,880/mt and finally closed at RMB 14,885/mt, down RMB 195/mt, or 1.29%. Trading volumes increased by 62 lots to 196 lots, while positions were up 10 lots to 2,130 lots.

In China’s domestic spot market, spot lead prices edged down, quotations Nanfang were at RMB 15,080/mt, with premiums of RMB 120/mt over the most active SHFE lead price. Shenqian and lead from Gejiu region were quoted between RMB 14,980-15,000/mt, while Hengchang was offered at RMB 14,900/mt. Transactions were limited with enterprises downstream remaining cautious.

According to SMM’s survey to 30 enterprises, most market players were pessimistic, with 73% of them believing lead prices will continue to fall and will likely dip to a low of RMB 14,800/mt this coming week. Since PMI figures of China, the euro zone and Germany were all lower than expected in May, and since the much-concerned US employment data for May was reported disappointing, US equities and crude oil prices both slumped, arousing market fears. The proportion of canceled warrants on LME fell below 20%. With uncertainty remained in the short term, most enterprises downstream will hold cautious and will limit purchases given the poor orders.

The remaining 27% market players believed lead prices will hover around RMB 15,000/mt. The intensified European debt crisis and bleak European economy leaves market confidence close to collapse. However, as LME will be closed for holiday during the first two days this coming week, SHFE lead prices will be more sensitive to domestic stocks and are likely to be resilient. With regard to market fundamentals, LME lead inventories continued to decline, but downstream demand in spot market should remain unimproved. Smelters will be more reluctant to move goods with financial pressures easing at early month, leaving both supply and demand in sluggishness.