SHANGHAI, Jul. 10 (SMM) –On Monday, SHFE lead prices opened slightly lower at RMB 14,855/mt influenced by the lower-than-expected US non-farm payroll data released last Friday. In the morning, China’s June CPI was reported up 2.2% and PPI down 2.1%, within market expectations. In response, SHFE lead prices fluctuated narrowly between RMB 14,820-14,880/mt to finally close at RMB 14,840/mt with pressure at the 20-day moving average, down RMB 90/mt. Trading volumes were up 24 lots to 222 lots, and positions were up 92 lots to 2,136 lots.
Spot lead prices in China’s domestic markets remained firm. Shuikoushan was mainly quoted at RMB 14,970/mt, with spot premiums of RMB 120/mt over the most active SHFE lead price. Hanjiang and brands from Gejiu region in Yunnan province were quoted between RMB 14,900-14,920/mt. Quotations for Shenqian were around RMB 14,860/mt. In the afternoon, spot lead prices changed little. Smelters were still reluctant to move goods at low prices and traders held prices sticky. Downstream buyers were not willing to buy, saying lead prices were relatively high, leaving transactions quiet.
According to SMM’s survey, most industry insiders were pessimistic to lead price movements this week, believing it is nearly impossible for lead prices to rise above RMB 15,000/mt. About 87% market players note lead prices should hover within the RMB 14,800-14,950/mt range. With the influence from the deal reached at EU summit digested by the market, the US dollar index stood above a high of 83 driven by the worse-than-expected non-farm payroll data for June released last weekend. The European debt issues remained unresolved, placing downward pressures on LME lead prices and posing strong resistance at USD 1,900/mt. SHFE lead prices, influenced by LME lead prices, may gain certain support at RMB 14,850/mt but will be under resistance at RMB 15,100/mt. In China’s domestic spot market, the average operating rate at domestic primary lead smelters was only 56.65% in June due mainly to remaining low lead prices and mid-year maintenances, down over 7 percentage points from a month ago. Most smelters were adjusting production via production cuts and maintenances, and many reflected little intention to sell goods when prices were below RMB 15,000/mt. The lower selling interest and production cuts may offer some support for low-end lead prices.
The remaining 13% market players believe spot lead prices should edge down and probably fall below RMB 14,600/mt this week. The moves to loosen monetary policies by central banks last week, especially the unexpected interest rate cuts by China’s central bank, intensified market concerns over China’s slowdown, and base metals showed no strong response to the action. With regard to demand, electric vehicles should have step in their conventional peak demand season, but demand is still weak at present. With the demand from end users remaining unimproved, lead prices are more sensitive to economic news. Investors were relatively cautious given the negative economic situations. In this context, LME lead prices may fell below the moving averages and SHFE lead prices are expected to surrender last week’s gains and move around RMB 14,650/mt.