SHANGHAI, Jan. 22 (SMM) – The SHFE 1303 lead contract price gapped higher at RMB 15,270/mt on Monday influenced by the rising LME lead prices last Friday, but fluctuated down to RMB 15,195-15,230/mt due to unimproved demand. In the afternoon, SHFE lead prices fell further to close at RMB 15,140/mt, down RMB 50/mt. Prices are expected to open lower on Tuesday.
In China’s spot lead market, quotations remained firm on Monday due to limited supply for branded goods. Chihong Zn & Ge was quoted at around RMB 14,780/mt, with spot discounts of RMB 410/mt over the 1303 SHFE lead contract price. Quotations for Mengzi and Hanjiang were mainly at RMB 14,680/mt, while those for Shenqian were around RMB 14,660/mt. Transactions remained quiet with most downstream enterprises buying as needed.
With respect to lead price trends this week, 33% of industry insiders surveyed by SMM are optimistic, expecting downstream buyers to replenish goods for the Chinese New Year holiday, which will help buoy lead market. Besides, the high spot discounts over the most active SHFE lead contract price encouraged arbitrage, leaving spot lead supply tight. This may also drive up lead prices, with traded prices expected at RMB 14,700-14,850/mt. Meanwhile, the better-than-expected 4Q GDP data in China and the rising US housing starts for December which hit a high never seen since July 2008, combined with positive technical indicators, may cause LME lead prices to move between USD 2,300-2,325/mt.
67% industry insiders believe spot lead prices should remain flat at RMB 14,650-14,750/mt this week. In spite of positive economic data in China and the US, the US debt ceiling issue remains a market concern and should restrict any increase in LME lead prices. The US House will vote on a three-month debt limit increase, while the Eurozone finance ministers will make a crucial decision on bank restructuring and bailout funds. The uncertainty surrounding these events and declining trading volume will cause LME lead prices to test USD 2,300/mt. In China’s spot lead market, a majority of lead-acid battery producers, except a few large ones which directly purchase from smelters, will still purchase on an as-needed basis, leaving trading muted.