SMM Lead Market Daily Review (2013-1-7)

SHANGHAI, Jan. 8 (SMM) – The most active SHFE lead contract price opened lower at RMB 15,235/mt on Monday as market confidence was dampened by the doubts about the sustainability of Fed’s stimulus measures and the falling LME lead prices. Prices remained around the opening level in the morning session but touched a low of RMB 15,165/mt since LME lead prices fell further to finally end the day at RMB 15,170/mt, down RMB 80/mt. Trading volumes were down 136 lots to 266 lots, and positions fell 44 lots to 2,344 lots.

On Monday, SHFE lead prices were still weighed on, but investors in China spot lead market were optimistic to lead demand due to the price increase for motive lead-acid batteries. Thus, quotations for spot lead were firm. Chihong Zn & Ge was quoted at RMB 14,780/mt, with spot discounts of RMB 420/mt over the most active SHFE lead contract price. Quotations for Chengyuan and Nanfang were RMB 14,750-14,760/mt. Offers for Dongling and Mengzi were mainly at RMB 14,700/mt while those for Shenqian and brands from Gejiu region remained low at RMB 14,660/mt. Transactions improved from last Friday.

According to SMM survey to 30 industry insiders, 13% market players hold a positive attitude to lead market this week. The US fiscal cliff issue was resolved and market is optimistic to the 4Q report of the US enterprises to be released recently. Plus the mild growth in nonfarm payrolls, market concerns were eased somewhat. Besides, LME lead inventories fell 7,700 mt to 312,625 mt during the first three trading days in 2013, giving support to lead prices. Thus, these market players expect LME lead prices to rise to move between USD 2,350-2,400/mt this week. In China’s spot lead market, prices on motive lead-acid batteries began increasing with the onset of the high demand season, strengthening market expectations to a more brisk lead market. In this context, cargo holders should hold lead prices firm, with spot lead prices expected at RMB 14,750-14,850/mt, up RMB 50/mt from the average price in last week.

The remaining 87% investors are cautious due mainly to the concerns over the termination of QE3 by the Fed in 2013 which overshadowed the positive influence from the settlement of the US fiscal cliff issue. Besides, the US dollar index remained high at 80.5, combined with spot discounts of USD 10/mt over LME lead prices, LME lead prices will be weighed on, but LME lead should still gain support from longs, with prices expected to hover around USD 2,350/mt. In spot lead market in China, despite the price increase for lead-acid batteries, the overcapacity in battery industry should not be neglected. Therefore, the higher prices are not generally accepted in the market, so investors believe spot lead prices will unlikely improve significantly but should be RMB 14,650-14,800/mt.