SMM Lead Market Daily Review (2013-3-4)

SHANGHAI, Mar. 5 (SMM) – The SHFE 1305 lead contract price became the most actively traded one on March 4 and opened lower at RMB 14,965/mt. Prices kept falling as the Shanghai Composite Index fell 3.65% last Friday due to the slump in property sector and finally closed at RMB 14,885/mt, down RMB 125/mt. Trading volumes fell 12 lots to 210 lots, while positions were up 118 lots to 2,026 lots, but settlement price was slightly higher at RMB 14,941/mt.

SHFE lead prices fell again with spot lead prices in China down significantly. Quotations for Chihong Zn & Ge were at RMB 14,710/mt, with spot discounts over the most active SHFE lead contract price at RMB 70-80/mt. Shuangyan and Hanjiang were quoted at RMB 14,570/mt, down nearly RMB 100/mt from last Friday. No quotation was reported for Shenqian. Downstream buyers purchased in limited amount at lows, with trading improved slightly.

The US dollar index hit a new high due to the automatic spending cuts in the US, dragging down base metals with LME lead refreshing new low for the year. SMM’s survey to 30 industry insiders concerning lead price trends this week revealed the following insights:

27% industry insiders believe lead prices have not yet bottomed and will likely extend declines this week, with LME lead prices possibly dipping below USD 2,200/mt and spot lead prices falling to RMB 14,550-14,650/mt. The automatic spending cuts in the US will impede the US economic growth, adding to pessimism in the market. China’s official PMI slipped for the first time after advancing for four months, triggering investor concerns over China’s economy. In the Europe, January’s unemployment rate hit a record 11.9%, and uncertainty remained for the political situation in Italy. Besides, the US dollar continues to rebound and will likely stand above 82.5 this week. Technical indicators also reflect room for LME lead to fall further. In spot lead market in China, the onset of the low demand season for lead-acid batteries and high finished goods inventories at downstream enterprises drove buying interest down, while cargo holders held prices relatively firm due to little financial pressure, leaving trading thin. 

73% market players believe lead prices will unlikely fall further after the 3.8% slump in LME lead last week. Meanwhile, some investors are optimistic to the NPC and CPPCC sessions, noting the reform focusing on urbanization will benefit China’s economic growth. Domestic stocks are thus expected to rebound during the two sessions, giving certain support to SHFE lead prices. In addition, SHFE lead prices have fallen below the lower Bollinger band and will likely stop falling to fluctuate narrowly around RMB 15,000/mt this week. In China’s spot lead market, lead demand should improve in March as stocks built ahead of the Chinese New Year holiday were consumed, but overall demand will remain weak. Spot lead prices are expected at RMB 14,700-14,800/mt, with spot discounts over the most active SHFE lead contract price expanding to RMB 200/mt.