SHANGHAI, Oct. 22 (SMM) – The most-traded SHFE lead contract prices started at RMB 14,405/mt Monday and briefly touched a low of RMB 14,360/mt. However, the prices were later boosted by the news that “T+0” settlement which allows investors to buy and sell a stock on the same day is now open to some products on the Shanghai Stock Exchange, to move up to RMB 14,410-14,430/mt in the morning session. The SHFE lead for December delivery further climbed to RMB 14,450-14,470/mt and finally closed RMB 60/mt higher at RMB 14,455/mt. Traded volumes were up 10 lots to 1,402 lots, while positions dropped 32 lots to 10,010 lots.
Spot lead prices in Shanghai edged up. Prices for Chihong Zn & Ge were between RMB 14,290-14,300/mt, flat with last Friday and with a contango of RMB 120-130/mt against the most active SHFE lead contract price. Supplies from the company increased. Hanjiang, Mengzi, and Yunyue were traded at RMB 14,220-14,230/mt, while Humon and Shenqian were sold at RMB 14,160-14,180/mt. Deliverable brands, except for Chihong Zn & Ge, were hardly seen as traders rarely conducted arbitrage. Downstream consumption was poor. In the afternoon, traders lowered prices to promote sales, with Jinsha offered at RMB 14,270-14,280/mt and prices for Dongling at RMB 14,260/mt. Trading was more brisk than morning session.
According to the most recent SMM survey, half of industry participants polled believe that LME lead prices will break through USD 2,200/mt this week, with the most active SHFE lead contract price climbing to RMB 14,500/mt, which is also the 60-day moving average, and spot lead prices expected at RMB 14,250-14,350/mt. Positive result of the US debt ceiling debate has helped free the market from concerns over a US default. Rating agency S&P estimates that the Federal government shutdown may cost 0.6% in growth from US 4Q GDP, equating to an economic loss of USD 24 billion, and the resultant uncertainty to the US economic prospect may cause further delay of QE tapering. In this context, market attention will switch from these risky events to economic signposts at major economies which turned out upbeat lately. At the meantime, LME lead prices have found support at the 250-day moving average which promises to lead to significant price hike given that LME lead prices had staged strong rallies after standing above this mark in late May and early August. Longs may also help boost lead prices this week should economic figures hold up well. In China’s domestic markets, SHFE and spot lead prices may rise in tandem with LME lead.
Projection of 30% of industry insiders is that lead prices will consolidate this week, noting that a lack of market confidence and uncertainty toward the US nonfarm payrolls and PMI data due for release this week will leave investors cautious.
The remaining 20% of market players hold that LME lead prices will retreat to USD 2,130/mt and SHFE 1312 lead contract prices will slip to RMB 14,200-14,300/mt, with spot lead traded at RMB 14,100-14,200/mt. LME lead bucked the trend to drift higher last week despite growing concerns over the US debt crisis, leading some to believe that LME lead will present a pullback this week given the absence of new stories. In China, lead consumption remained tepid, while selling interest in spot market will be escalated given higher finished goods stocks and accelerating production at smelters, which will weigh spot lead prices down.