SMM Daily Review - 2012/6/18 Lead Market

SHANGHAI, Jun. 19 (SMM) – On Monday, SHFE lead prices gapped RMB 180/mt higher at RMB 15,280/mt boosted by the result of the Greek election. Later, SHFE lead prices fluctuated down due to a lack of buying activities and gained support at RMB 15,160/mt to stabilize between RMB 15,160-15,175/mt, with prices finally closing at RMB 15,150/mt, up RMB 45/mt. Trading volumes were down 64 lots to 78 lots, while positions remained unchanged at 2,180 lots.

Branded lead in China’s spot lead market, including Nanfang, were quoted at RMB 15,190/mt, with spot premiums of RMB 50/mt against the most active SHFE lead contract price. Mengzi and Hanjiang were quoted between RMB 15,120-15,140/mt. Offers of Shenqian was at RMB 15,080/mt. The actual traded prices were RMB 20-30/mt lower than quotations due to weak consumption downstream. Smelters were reluctant to sell goods with bullish outlook but dealers were moving goods actively. Downstream buyers purchased as needed, leaving transactions quiet.

An SMM survey shows that opinions on lead prices were divided despite the end of Greek election. 47% market players were optimistic, believing lead prices will edge up to touch RMB 15,300/mt this coming week. The crisis in Greece was temporarily eased as the pro-bailout New Democracy party won the election on Sunday. Meanwhile, the lower-than-expected manufacturing and industrial production data in the US added to market expectations on QE3 measures, improving market sentiment briefly. Moreover, technical indicators presented an upward trend, and lead prices in China’s domestic spot markets tended to stabilize, probably driving up the lead consumption downstream. Thus, optimistic investors expect lead prices may be RMB 15,100-15,250/mt this coming week.

40% market players note lead prices will not likely improve. The result of the Greek election is in line with market expectations and will not exert significant influence on market. Furthermore, whether the elected party is able to form a coalition government still remains uncertain, meaning the possibility for the third general election still exists. Besides, there is strong disagreement on the implementation of QE3 which is expected to be discussed on the upcoming meeting of the Fed. Market focus will return to the US economy after the Greek election. Investors remain cautious fearing remaining market risks. In China’s domestic spot markets, demand remains sluggish. As such, these investors believe lead prices should hover around RMB 15,000/mt with traded prices expected between RMB 15,000-15,100/mt.

13% market players were pessimistic. Although Greece’s New Democracy party won the election, easing concerns over a Greek exit, it will be tougher for Europe to resolve its debt issue if Greece stays in the Euro zone. In addition, there’s little chance for US to adopt QE3 measures in the short term despite the slowing US economy. With respect to market fundamentals, demand for lead-acid batteries may not improve until July when the traditional peak demand season arrives. Smelters are expected to be more willing to sell goods under financial pressures, but consumption downstream will remain soft due to poor orders. Thus, some market players believe it is possible for lead prices to fall further.