SMM Daily Review - 2012/7/2 Lead Market

SHANGHAI, Jul. 3 (SMM) – On Monday, SHFE lead prices opened over RMB 100/mt higher at RMB 14,750/mt as market was boosted by the positive result of EU summit last Friday. SHFE lead prices later moved between RMB 14,725-14,785/mt with resistance at the 20-day moving average and support at the 10-day moving average, and finally closed at RMB 14,765/mt, up RMB 130/mt. Trading volumes were up 98 lots to 308 lots, while positions were down 86 lots to 1,899 lots.

SHFE lead prices started RMB 115/mt higher and fell after rising to RMB 14,890/mt on Monday. Quotations in China’s spot lead markets moved up. Well-known brands including Wanyang and Nanfang were quoted between RMB 14,780-14,800/mt, with spot premiums over the most active SHFE lead price narrowing from RMB 120/mt recorded last week to RMB 0/mt. Hanjiang was quoted at RMB 14,720/mt and Mengzi was quoted at RMB 14,750/mt. Smelters remained unwilling to move goods, and traders were willing to purchase due to a lack of supply, but buyers only purchased cautiously.

Market sentiment improved after last weekend’s EU summit. According to SMM’s survey, 53% industry insiders remain conservative and believe the positive influence from the EU summit will be limited. The Bank of England and the European Central Bank will issue interest-rate decision on Thursday, and the US is due to release its report on non-farm payrolls. Besides, opinions on whether the Federal Reserve may introduce QE3 measures remained divided. Given these certain factors, LME lead price movements should be cautious and test USD 1,800/mt and SHFE lead prices are expected to move between RMB 14,600-14,800/mt. In domestic spot markets, downstream enterprises were not actively buying goods due to remaining poor orders despite the arrival of traditional high-demand season, posing resistance for lead prices to rise. Although quotations were held firmly, the actual traded prices will remain low with spot prices expected between RMB 14,700-14,850/mt this week.

27% industry insiders were optimistic. EU leaders agreed to provide EUR 120-130 billion for economic growth and to directly inject capital to Spanish banking system, and decided to take measures to cut down bond yields in Spain and Italy. These all can be regarded as a breakthrough in resolving the European debt issues. The US dollar index consequently slumped to 81.5, and LME lead prices may hit USD 1,900/mt. In China, spot lead prices were still lower than bottom lines of smelters, leaving unwillingness to sell goods remained, which may help support lead prices to certain degree. Thus, optimistic investors expect lead prices will likely hit RMB 15,000/mt this week.

The remaining 20% investors were pessimistic, saying although the outcome of the EU summit was beyond expectations and new measures were put forward on the summit, details on how these measures will be implemented remain unclear. The conflict among some European countries may not be fundamentally resolved in short term. The boost from the EU summit will only be a drop in the sea. In addition, the HSBC China PMI tumbled to 48.2 after seasonal adjustments, the lowest point since March 2009. LME lead prices fell again below USD 1,800/mt as a result. In domestic spot market, buying interest among lead-acid battery producers remains low due to weak demand, so pessimists expect lead prices should move between RMB 14,500-14,700/mt this coming week, giving back the gains at the beginning of the week.