SHANGHAI, Oct. 8 (SMM) – SHFE 1312 lead contract price gapped nearly RMB 100/mt lower at RMB 14,050/mt on the first trading day after the Chinese National Day holiday influenced by an over 3% slump in LME lead during the seven-day break. Market concerns held many investors on the sidelines, leaving the most active SHFE lead contract hovering between RMB 14,030-14,050/mt. In the afternoon trading session, the rallying Shanghai Composite Index pushed the SHFE lead for December delivery up to a high of RMB 14,080/mt briefly, but resistance at the 5-day moving average was strong. Resultantly, the most active SHFE lead contract price closed at RMB 14,055/mt. Traded volumes for the SHFE 1312 lead contracts added 54 lots to 492 lots, and positions were up 66 lots to 8,380 lots. Now that LME lead prices were still consolidating, SHFE lead prices will remain under the influence of LME lead before any breakthrough. Warehouse warrants for SHFE lead continued to fall by 277 lots to 73,926 lots Tuesday, helping limit any downward room for SHFE lead.
In Shanghai spot market, warehouse warrants for Chihong Zn & Ge were reportedly offered at RMB 14,050/mt, a premium of RMB 10/mt over the most active SHFE lead contract price, but few transactions were made. Yubei’s warrants were quoted at RMB 14,080/mt, a backwardation of RMB 40/mt over the SHFE 1312 lead contract price, with trading muted at high price. Shuikoushan’s warrants were quoted at RMB 14,040/mt, flat at the most traded SHFE lead contract price, while Chengyuan was offered at a premium of RMB 110/mt over the SHFE 1310 lead contract price at RMB 14,040/mt. The limited price gap between different brands dampened buying interest downstream, leaving transactions quieter than expected.
During the first day of the Chinese National Day holiday, LME lead prices fell below three moving averages and presented a 1.89% intraday loss due to the US government shutdown resulting from the failed budget talk. Later, mixed economic data from both China and the US left LME lead consolidating. SMM conducted a survey on lead prices after the holiday, finding that most industry participants were conservative.
60% of industry insiders surveyed by SMM anticipate that LME lead prices remain between USD 2,050-2,077/mt with resistance at the 10-day moving average, noting that the US shutdown caused a delay for release of US economic figures, including the September non-farm payrolls, adding to uncertainty in the market. In addition, the LME Week opened on October 8 will garner considerable attention, leaving prices directionless before any new trends. In spot lead markets, expectation for the post-holiday replenishments fell through, and both sellers and buyers waited outside the markets given uncertainty from the macroeconomic front. Lead-acid battery producers were busy consuming existing finished goods inventories, only purchasing as needed given modest orders and uncertain market outlook. Meanwhile, the typhoon Fitow lashing China’s Jiangsu, Zhejiang and Shanghai also negative affected sales of lead ingots and impeded lead shipments to major consuming regions, such as Zhejiang and Jiangsu. The resulting quiet transactions lead many market players to believe that lead prices will test RMB 14,000/mt repeatedly this week.
The remaining 40% of market participants are pessimistic as the US government has shut down for eight days and debt ceiling concerns loomed large. Tumbling US and European equities mirrored intensifying worries among investors, and caused some to expect that LME lead prices may dip to a low of USD 2,030/mt, with resistance at the 5-day moving average. In China’s domestic markets, enterprises continue to bear financial pressure as loan issuance has been postponed due to the week-long holiday. As such, lead smelters expressed intention to increase supplies in about next 10 days. With lead supply growth exceeding the pace of restocking by downstream buyers, spot lead prices will be dragged lower, with traded prices expected at RMB 13,850-14,000/mt.