SMM Lead Market Daily Review (2012-12-31)

SHANGHAI, Jan. 4 (SMM) – The most active SHFE lead contract price opened RMB 100/mt lower at RMB 15,095/mt on the last trading day of 2012 due to falling LME lead prices overnight. As the final reading of HSBC manufacturing PMI for December was above expectations and previous figure, lifting the Shanghai Composite Index to rise as much as 1.6%, SHFE lead prices rose and moved between RMB 15,200-15,260/mt to finally end at RMB 15,265/mt. Trading volumes were down 258 lots to 202 lots, and positions increased 52 lots to 2,442 lots.

On the last trading day of 2012, cargo holders mainly focus on settlements, leaving quotations rarely reported in the China’s spot lead market. Quotations for Chihong Zn & Ge were at RMB 14,780/mt, with spot discounts of RMB 450/mt over the most active SHFE lead contract price, and Chengyuan was quoted at RMB 14,700/mt. Trading was quiet with many market players already off for holiday.

The SHFE will only be open for two days and the LME will be open for four days this week, causing most investors to book profits and stay on the sidelines. However, SMM still conducts a survey to 30 industry insiders on the lead price trends this week, and opinions are divided due mainly to different views on the US fiscal cliff issue.

87% of market players surveyed by SMM believe trading should be quiet this week given the New Year holiday, and the uncertainty about the US fiscal cliff talks should persuade investors to seek US dollar for haven, with the US dollar index expected to hover around 79.6. In China’s spot lead market, most cargo holders will be off for holiday, while downstream buyers will not be active in purchasing following the replenishments ahead of the holiday. Thus, a majority of investors expect spot lead prices will be RMB 14,650-14,800/mt this week.

The remaining 13% market players are more optimistic given the positive economic figures in China including the above-expected HSBC manufacturing PMI for December. Meanwhile, although market is still concerned that the US budget talk will fail to make progress with the approach of the deadline for fiscal cliff, expectations are strong that the US government will introduce interim measures to deal with the issue. Besides, LME lead inventories still present a downtrend, which will give some support to low-end lead prices. In China’s domestic spot markets, several enterprises stocking goods in small amounts before the holiday may increase procurement this week. In this context, these investors believe spot lead prices will edge up to RMB 14,700-14,850/mt.