SHANGHAI, Jul. 17 (SMM) – SHFE lead prices rallied soon after opening lower at RMB 14,915/mt Monday, but lacked upward momentum due to declines in LME lead prices and Chinese stock market to fluctuate down to RMB 14,930-14,980/mt. SHFE lead prices regained the losses at the tail of trading to finally close at RMB 14,995/mt, up RMB 35/mt. Trading volumes were up 160 lots to 356 lots and positions were up 110 lots to 2,422 lots.
SHFE lead prices extended increase on Monday. Quotations for Nanfang and Shuikoushan were mainly between RMB 15,080-15,090/mt, with spot premiums over the most active SHFE lead price at RMB 130-140/mt. Mengzi was quoted at RMB 15,030/mt and Shenqian was quoted at RMB 15,010/mt. With lead prices rising further, smelters were more willing to move goods but traders and downstream buyers only waited on the sidelines due to the higher prices, leaving trading thin.
According to SMM’s survey, 33% of industry insiders are optimistic to lead price movements this week, noting spot lead prices tend to stabilize and do not rule out the possibility of rising to a high of RMB 15,300/mt. Given the unexpected rise in the US PPI and China’s 2Q GDP in line with forecasts, many investors believe no more negative reports are expected in the near term. Market predicts China will implement more easing policies, which may give a boost to LME lead prices. Meanwhile, LME lead inventories kept falling by 3,900 mt last week. Therefore, LME lead prices are expected to return to USD 1,900/mt this coming week, and SHFE lead prices may break through the 60-day moving average. In China’s domestic spot market, with the onset of the high-demand season for electric vehicle batteries in July, orders at electric vehicle battery producers are expected to improve, helping improve lead demand and bolster lead prices.
The remaining 67% industry insiders are relatively conservative, believing spot lead prices may not fluctuate widely and should stay around RMB 15,000/mt. In Europe, the progress in resolving the European debt issues has been slow, and in China, the PBOC has lowered interest rates twice against the weakening economic data, but market did not show strong response. Under these situations, many investors still hold bearish mood to the market, expecting LME lead prices to move between USD 1,850-1,880/mt while SHFE lead price to gain support at the 20-day moving average but under resistance at the RMB 14,950/mt line. In China’s spot lead market, the peak-demand period for electric vehicle batteries may primarily fall in August, so orders at battery producers should only improve marginally, which will not be sufficient to boost lead prices. If lead prices still hover around RMB 15,000/mt, smelters should remain uninterested in selling goods, thus resulting in weak market fundamentals.