SMM Daily Review - 2012/6/11 Lead Market

SHANGHAI, Jun. 12 (SMM) – Since Spain was offered EUR 100 billion loan, easing market concerns over the country’s crisis, SHFE lead prices opened RMB 120/mt higher at RMB 15,160/mt and touched a high of RMB 15,205/mt but met resistance at the 20-day moving average. Later, prices moved between RMB 15,080-15,120/mt and finally closed at RMB 15,100/mt, down RMB 105/mt. Trading volumes were down 10 lots to 114 lots and positions were up 50 lots to 842 lots.

On Monday, SHFE lead fluctuated down after opening higher. In China’s spot lead market, offers for Nanfang were at RMB 15,130/mt, with spot premiums of RMB 50/mt against SHFE lead for August delivery. Quotations from Mengzi and Shenqian were between RMB 15,010/mt and RMB 15,110/mt, respectively. Dealers were moving goods normally, but buying interest downstream was still low with concerns over China’s economic slowdown and Greek election, leaving transactions limited.

With regard to lead prices this week, 40% market players believe lead prices tend to stabilize and edge up slightly. China’s May CPI was reported up 3%, with the rise falling from the previous data. Besides, the US dollar index fell below the 82 mark as Spain was offered EUR 100 billion aids. As such, LME lead prices may test USD 1,900/mt this coming week. In China’s domestic spot markets, smelters maintain normal sales when prices stay above RMB 15,000/mt. With the onset of peak-demand season for lead-acid batteries, lead-acid battery producers may purchase at low prices and lead consumption will likely improve although demand is not as strong as in previous years. Thus, optimistic investors expect lead prices to stabilize and move between RMB 15,150-15,250/mt this coming week.

The remaining 60% market players are relatively conservative, believing lead prices should continue fluctuating narrowly and present little change from the previous week. Market is still focused on European debt issue, especially the upcoming Greek election which will pose great challenge to European countries. As the Fed gives no hints of QE3 measures, riskier currencies were under downward pressure, and markets shall remain cautious before any clear directions. In China, SHFE lead prices continue a weak trend, with positions for the SHFE current-month contract only at 58 lots. Given the serial economic data to be released and the upcoming Greek election, SHFE lead prices are expected fluctuate narrowly in the near term. In domestic spot markets, enterprises downstream may still purchase as needed, while smelters should be reluctant to sell at prices lower than RMB 15,000/mt, helping support prices. As such, these investors expect lead prices to hover between RMB 15,000-15,150/mt this coming week.