SMM Lead Market Daily Review (2012/10/8)

SHANGHAI, Oct. 9 (SMM) -- On Monday, SHFE lead prices opened RMB 185/mt lower at RMB 15,975/mt, dragged down by LME zinc prices, moving around RMB 15,980/mt during the day. Boosted by the Shanghai Composite Index, SHFE lead prices finally closed at RMB 16,045/mt, down RMB 115/mt. investors left the market and took a wait-and-see attitude. Trading volumes decreased by 16 lots to 100 lots, and total position decreased by 22 lots to 1,230 lots.

In domestic spot markets, well-known brands including Nanfang and Chihong Zn & Ge were quoted between RMB 15,680-15,700/mt, with discounts against SHFE three-month lead contract prices between RMB 280-300/mt. Brands including Dongling, Hanjiang and Mengzi were traded between RMB 15,650-15,660/mt, and Shenqian and Baiyin were traded between RMB 15,620-15,630/mt. investors were generally cautious on the first trading day following holidays, and downstream buyers purchased on an as-needed basis, with transactions muted.
 
SMM undertook a survey regarding lead price trends and found that 67% insiders believe lead prices should continue to fluctuate this week. LME lead prices should move between the 10-day and 20-day moving averages, and SHFE lead prices should hover around RMB 16,000/mt . Spot discounts against SHFE three-month lead contract prices should remain around RMB 300/mt, with traded prices between RMB 15,600-15,700/mt. US major economic data was mixed. Although US manufacturing, non-farm employment data and unemployment data were positive, industrial orders dropped most sharply in three years on a MoM basis. In this context, LME lead prices will barely rise and fluctuate narrowly. On the other hand, Spain's and Greece's problems remain. Besides, spot demand continued to weaken post the holidays, and downstream buyers still purchased on an as-needed basis, dragging down lead prices.
 
The remaining 33% insiders are pessimistic, believing spot lead prices should fall below RMB 15,500/mt. Concerns dominated the market, and falling base metals prices following the holidays deepened investors' pessimism. The IMF will lower expectations of global economic growth for this and next year, causing concerns over global economic outlook. The positive US unemployment data depressed expectations that the US Federal Reserve will push additional monetary policies. In this context, the US dollar index will likely rise to 80, and LME lead prices will drop to USD 2,200/mt. SHFE lead prices should move around the 20-day moving average. On the first trading day following the holidays, spot lead prices fell by RMB 75/mt, keeping downstream buyers cautious. Smelters increased goods supply due to growing inventories. In this context, lead prices should fall further.