SMM Lead Market Daily Review (2013-7-15)

SHANGHAI, Jul. 16 (SMM) – On Monday, SHFE lead price trends were little affected by the release of China’s Q2 GDP growth as the figure was basically in line with expectation. The SHFE 1309 lead contract price started at RMB 13,900/mt and moved around RMB 13,800/mt before 11:00 with moving range narrowing compared with last Friday. At midday, prices presented a sudden rally of RMB 20/mt but only fluctuated between RMB 13,870-13,900/mt later, ending the day at RMB 13,890/mt, up RMB 15/mt from the previous trading day. Trading volumes were down 18 lots to 66 lots, and positions increased 22 lots to 2,500 lots. The strong resistance at several moving averages may still be major hurdles for any increase in lead prices.

Spot lead prices in Shanghai remained little changed from last Friday. Goods of Chihong Zn & Ge was quoted at RMB 13,780/mt with transactions scarce. Lead from Nanfang was offered at RMB 13,730/mt, while that of Hanjiang was quoted at RMB 13,720/mt, with discounts against the most active SHFE lead contract price at RMB 150/mt. The limited output at smelters curtailed supplies to spot lead market, and upbeat market outlook with the arrival of high-demand season also left smelters unwilling to move goods.

SMM’s latest survey of 30 industry insiders shows that a majority, or 73%, of them are cautious to lead price trends this week, noting that despite the satisfactory US economic data, the US dollar may start consolidating given uncertainty to the timing of scaling back the asset purchasing asset. In Europe, the unending negative reports, albeit their little influence on major economies, left equities directionless. Besides, China’s Q2 GDP growth was reported slower than Q1 but within market expectation. However, complicated economic conditions left market player difficult to predict policy tendency for H2, and other economic figures released later also showed no significant changes. The latter half of this week will see a pile of risky events, including Ben Bernanke’s testimony, release of US Beige Book, and announcements of policy decision by the Bank of England, the Bank of Japan, as well the Bank of Canada. In this context, most investors expect LME lead to hover at USD 2,060/mt this week. In spot lead markets, smelters will still supply goods for long term contracts, and downstream buyers may purchase to order, with spot prices expected at RMB 13,650-13,800/mt.

The remaining 27% investors are more optimistic most of recent declines in LME lead inventories were contributed by Asian warehouses, which was seen as an uptick in lead consumption in China – a traditional large lead consumer. Besides, given the easing inventory pressure and stable order growth, China’s electric vehicle battery giants, Tianneng and Chaowei, both raised prices for electric vehicle batteries for two consecutive weeks, with 48V 12AH battery prices up RMB 40-50/set to RMB 350/mt, and prices for 48V 20AH battery rising RMB 35/set to RMB 550/set. Although some other producers failed to follow suit, most reported improvement in sales and are considering raising prices. On the demand side, shortage in domestic lead concentrate supply continue to impede refined lead smelting, while some lead smelters entered regular maintenance cycles in summer months. Thus, the tightening supply may also lend some support to lead prices. These optimistic investors expect spot lead price to be RMB 13,700-13,850/mt this week and LME lead to edge up along with weakening US dollar with support at USD 2,060/mt but resistance at USD 2,100/mt.