SHANGHAI, Feb. 5 (SMM) – The 1304 SHFE lead contract price gapped nearly RMB 100/mt higher at RMB 15,600/mt on Monday due to the positive US economic data released last Friday and the lower US dollar index. Some investors booked profits later, driving SHFE lead prices to edge down, but prices returned to RMB 15,520-15,570/mt due to strong LME lead prices and rising domestic stocks and finally ended at RMB 15,535/mt. Trading volumes increased 174 lots to 336 lots, while positions were up 112 lots to 2,418 lots.
Quotations and inquiries in China’s spot lead market were fewer with enterprises closing for the Chinese New Year holiday. Quotations for Chihong Zn & Ge was rose above RMB 15,000/mt to RMB 15,030/mt, with spot discounts over the 1304 SHFE lead contract price at RMB 520/mt. Hanjiang and Shenqian were quoted at RMB 14,950/mt and RMB 14,880/mt, respectively. Transactions were rarely made at high prices.
Although most enterprises will halt operations in the last week before the Chinese New Year holiday, SMM conducted a survey to 30 industry insiders regarding to lead price trends this weeks, hoping to offer guides for lead-related enterprises.
67% of the surveyed market players were optimistic. LME lead prices traditionally rise around the Chinese New Year holiday. The US employment saw mild recovery recently, and ISM manufacturing index hit a high never seen since April 2012, combined with the lifted consumer confidence, the US equities rose significantly. In China, the official non-manufacturing PMI grew for the fourth straight month in January, reaffirming the rebound in China’s economy. The improving economic conditions strengthened market expectations for rising base metals. In addition, the US dollar index hovered at low levels around 79, lending some support to LME lead prices, and technical indicators also reflected upward trends. In this context, LME lead prices should move around USD 2,500/mt this week. In China, cargo holders, taking the initiative in spot lead market, will hold quotations firm given the strong LME lead prices, driving spot lead prices to RMB 14,900-15,050/mt.
The remaining 33% market players expect spot lead prices at RMB 14,850-14,950/mt, noting that downstream consumption will be soft ahead of the holiday even though sellers keep quotations high. Most investors will stay out of the market this week, and those entering the market should only purchase in limited amount at low prices. As such, any increase in SHFE lead prices will little affect spot lead prices. Furthermore, as the SHFE will be closed for a week during the Chinese New Year, market players will book profits and wait on the sidelines to avoid risks, leaving little room for SHFE lead prices to rise sharply. Thus, some industry insiders believe SHFE lead prices, less volatile than LME lead, may hover around RMB 15,550/mt this week.