SHANGHAI, Apr. 16 (SMM) – SHFE 1306 lead contract price opened nearly RMB 200/mt lower at RMB 14,230/mt on Monday due to the 2% slump in LME lead last Friday. Later, as China’s 1Q GDP growth was reported at 7.7%, lower than expectation, SHFE lead fell further to close at RMB 14,020/mt, down RMB 390/mt or 2.71% from the previous trading day. Traded volumes were up 80 lots to 156 lots, while positions were down 6 lots to 2,156 lots.
The slumping SHFE lead prices further undermined selling interest of cargo holders in spot lead markets. Quotations were rare, with Chihong Zn & Ge and Nanfang quoted at RMB 14,050/mt, RMB 150/mt lower than the SHFE 1306 lead contract price. Tongguan was offered at RMB 14,030/mt, down RMB 200/mt from spot lead prices last Friday. Downstream buyers were bearish and unwilling to purchase.
Several investment banks lowered gold prices as Cyprus reportedly planned to raise the funds by gold sales to deal with the financial woes, weighing down base metals. In this context, a majority of investors believe lead prices may be corrected this week according to SMM survey.
67% market players surveyed by SMM believe lead prices will start correction this week after the slump on Monday with technical indicators pointing upward and LME lead inventories still falling last week. Three major EU financial regulators jointly announced that the financial crisis in Cyprus would unlikely deteriorate. Besides, although the economic data in China and the US missed forecasts, the US dollar index is still under resistance and hovers around 82, while the US equities are on the rise with quarterly reports of the US companies show satisfactory performance. These may all lend support to lead prices, with LME lead expected to move above USD 2,000/mt this week. In China’s domestic spot markets, cargo holders will be more reluctant to sell goods, while downstream buyers will likely increase their purchases with declines in lead prices arrested, and spot lead prices are expected to move between RMB 14,050-14,200/mt, with rebound limited.
The remaining 33% market players expect lead prices to drop this week due to plunges in LME base metals last Friday and continued falls in Shanghai Composite Index, noting that LME lead may fall below USD 2,000/mt and spot lead prices will move near RMB 14,000/mt, hitting new lows for the year. The University of Michigan Consumer Confidence Index hit a low last seen in July 2012, and retail sales slipped unexpectedly in March, while gasoline consumption was down sharply. China’s GDP growth for 1Q was 7.7%, lower than expectation, signifying moderated recovery. In China’s spot lead markets, low lead prices caused lead-acid battery producers to limit purchase for fear of further falls in prices. Besides, price war in motive battery segment was reignited as producers were under great inventory pressure, also constraining spot lead demand. Despite low selling interest, smelters will continue produce to fulfill long-term contracts, and lead supplies in the market are ample with the approach of delivery date. Thus, these investors believe lead prices will be dragged down by oversupply.