SHANGHAI, Nov. 19 (SMM) – The most active SHFE 1401 lead contract prices started at an intraday high of RMB 14,115/mt, but fell to around RMB 14,050/mt from RMB 14,100/mt on Monday. SHFE lead underperformed with sluggish transactions and finally ended at RMB 14,045/mt, down RMB 50/mt or 0.35%. Trading volumes shrank 696 lots to 382 lots, while positions grew 62 lots to 9,722 lots.
In Shanghai spot lead market, goods of Chihong Zn & Ge were offered at RMB 14,000/mt, flat with the most active SHFE lead prices, but barely traded on Monday. Yuguang resources were sold at RMB 13,980/mt, while Nanfang and Chengyuan were quoted at a discount of RMB 30-40/mt over SHFE 1312 lead contract prices and traded between RMB 13,950-13,970/mt. Humon was traded at RMB 13,940/mt. Spot lead prices failed to rise further and fluctuated narrowly. At present, most industrial participants expect lead prices to keep consolidating. Cargo holders moved goods as usual, while downstream producers purchased on an as-needed basis, leaving transactions light. Spot lead prices in Shanghai were basically in line with those in Guangdong and Henan provinces on Monday.
SMM conducted a survey of 30 industrial participants on lead prices this week. All of them hold that lead prices are consolidating for the time being and spot lead still faces weak demand despite that the macro economy and technical indicators picked up a little. They believe LME lead prices will move between USD 2,080-2,120/mt and China’s spot lead will be traded at RMB 14,000/mt. Market sentiment was neutral during the Third Plenary Session of the 18th CPC Central Committee, but failed to improve upon release of the final communiqué. Investors were concerned that due to strong resistance to economic reforms, reform policies would not materialize and that any economic restructuring would depress GDP in near term. The pessimistic sentiment was characterized by consecutive drops in the Shanghai Composite Index and in metals prices. However, frequent speeches delivered by Chinese leaders boosted hopes that economic reforms would be carried out as planned, alleviating market concerns to some degree. Combined with Fed Chairman nominee Janet Yellen’s strong support of the US Federal Reserve’s easy monetary policy and maintaining stable financial markets, metal markets turned more optimistic. There will be few market risk events this week, with the exception of the Fed’s latest interest rate meeting minutes due for release on Thursday. A string of economic reports will be released, including US housing data, the euro zone climate index and PMIs. Investors will lower expectations that the Fed will exit its current QE program despite recent upbeat US real estate results since US employment was still far below forecasts. Metals prices will be volatile this week due to surprisingly downbeat economic data from the euro zone. Based on China’s current economic conditions, the November manufacturing PMI should be positive. LME lead prices are expected to stabilize and rebound due to encouraging technical data, but will meet strong resistance at the average price level.
In China’s spot lead market, lead smelters will trade more actively as they are confronting tight liquidity, but a surge in deliverable goods from futures markets will put downward pressure on spot lead prices. Meanwhile, downstream producers will only purchase on an as-needed basis, leaving transactions sluggish.