Precious Metals Extend Declines, Lead Prices Bolstered by End-User Demand

With some Fed officials mentioned about the approach of a Fed’s retreat from its asset purchasing program, investors are sensitive to any report, hoping to find clear clue about the QE. Market expects the Fed to start tapering off QE in September at the earliest should economy continue to recover. 

 

Caution prevailed in both base metal and precious metal markets as a result. 

 

In domestic spot markets, SMM premiums for #1 copper narrowed to RMB 50-300/mt on Wednesday. Cargo holders were more actively moving goods to generate cash. In the afternoon, premiums for high-quality copper further contracted to RMB 200/mt. Some traders bought the dips, but enterprises downstream still purchased on an as-needed basis, leaving trading modest. 

 

Downstream buyers are believed to remain wary through H2. The latest SMM survey reveals that nearly 60% of domestic copper wire rod producers expected copper prices to hold steady, while 90% of them predicted no significant growth in Q3 consumption. Buying interest among downstream buyers was low when copper prices rose above RMB 50,000/mt. A glut in copper supply emplaced a ceiling on any price increase, and copper prices may be in search for support at lower level with consumption lagging supply growth.

 

Technical indicators presaged an end of correction for SHFE copper prices, and a clearer direction may emerge after the release of China’s economic data on August 8.

 

SMM survey shows that lead-acid battery producers have be inspired to ramp up production due to the continuous price hikes for electric vehicle batteries during July, driving up demand for polar plates. In response, processing fees for polar plates were raised, with goods deliveries also put off by some 3-7 days. The high temperatures hindered polar plate production, with exacerbating the supply tightness. SMM believes the brisk end user market was one of the major factors behind the firm lead prices.