SHANGHAI, Oct. 29 (SMM) – SHFE 1312 lead contract prices opened flat at RMB 14,385/mt on Monday and reached an intraday high of RMB 14,465/mt immediately, mirroring gains by LME lead prices last Friday. SHFE lead for December delivery then consolidated in RMB 14,430-14,450/mt range and finally closed at RMB 14,435/mt, up RMB 115/mt. Trading volumes gained 836 lots to 1,532 lots, while positions expanded 702 lots to 11,382 lots.
Spot lead prices failed to rise along with SHFE lead prices. Quote for Nanfang was RMB 14,300/mt, a discount of RMB 140/mt against the most active SHFE lead contract price. Mengzi was traded at RMB 14,270/mt, and Humon’s resources were sold at RMB 14,180/mt. Spot market has remained weak last week, but trading was even lighter on Monday as rising SHFE lead prices fueled wait-and-see sentiment among downstream buyers.
SMM’s latest survey of 30 participants in lead markets revealed that 40% of them, mostly smelters and traders, are bullish to lead prices this week, expecting LME lead to rise to USD 2,250/mt and spot lead prices up to RMB 14,300-14,400/mt. Last Friday, the University of Michigan consumer-expectations index was reported at 62.5 in October, a low never seen since November 2011. The US durable goods orders rose 3.7% MoM – the fastest pace in three months. Orders of durable goods excluding transportation, however, fell 0.1%. These downbeat numbers drove base metals to bounce back, an indication that market still believes the Fed will not commence QE tapering. Moreover, projections for economic data due for release this week, including US existing home sales, retail sales, ADP employment, and PMI, are not promising, strengthening expectations for the continuation of QE, and dampening the US dollar, which will help bolster base metals. In China, reform policies announced over the weekend and anticipation for pro-growth policies will inspire investment enthusiasm. Meanwhile, technical indicators also showed that LME lead may continue to trend up and test a high of USD 2,250/mt. In China’s spot lead markets, domestic lead concentrate supply tightened with winter approaching, which may lead to a decline in availability of spot lead and thus benefit lead prices.
30% of industry participants hold that lead prices will fall further this week, with LME lead down below the 250-day moving average to USD 2,170/mt and SHFE lead dipping as low as RMB 14,300/mt, and spot lead are expected to be traded at RMB 14,150-14,250/mt. Most of these participants are lead-acid battery producers, as they believe lead ingot supply will increase after smelters complete maintenance, while demand downstream should wane by the end of the month.
The remaining 30% believes lead prices will continue to consolidate given mixed economic reports. Despite positive expectation for China’s reforms, the tight liquidity conditions are not negligible, meaning investors will be more cautious.