SHANGHAI, Apr. 15 (SMM) – The most active SHFE 1405 lead contract price started last Friday’s night session at RMB 13,735/mt, and later dipped to RMB 13,695/mt before rebounding to RMB 13,745/mt. The metal ended down RMB 25/mt at RMB 13,735/mt. During the night session, traded volumes were 22 lots, while positions added 4 lots to 6,458 lots. On Monday, SHFE lead prices gradually crept up to RMB 13,780/mt, and finished level with last Friday at RMB 13,760/mt. Traded volumes contracted 298 lots to 698 lots, while positions shrank 248 lots to 6,206 lots. SHFE lead prices saw the weakest performance among the base metals complex due largely to seasonally low consumption, while downstream infrastructure construction for copper, aluminum, and zinc, however was in full swing.
In the Shanghai physical lead market, goods from Chihong Zn & Ge traded Monday between RMB 13,750-13,760/mt at discounts of RMB 10-20/mt over the most active SHFE 1405 lead contract price. Traded prices were RMB 13,730-13,750/mt for Nanfang, RMB 13,750/mt for Humon, and RMB 13,730/mt for Shuangyan. Traders were actively purchasing Nanfang resources in a bullish attitude. Some downstream producers ramped up purchases, while others remained in a wait-and-see posture, with trading volumes level with last week.
Lately SMM has carried out a survey of 30 industrial participants on whether the rebound in lead prices will be sustained this week. The survey shows that 60% are bullish, expecting LME lead prices to move up to the USD 2,100/mt mark, SHFE 1405 lead contract prices to rise above RMB 13800/mt, and spot lead prices to level with SHFE lead prices. Among a slew of economic reports scheduled for release this week, US retail sales and housing starts both are expected to be positive. The eurozone’s March CPI should fall further to 0.5%, down from February’s 0.7%. This, coupled with the loose monetary policy speech by the European Central Bank’s President Mario Draghi, will strengthen market hopes of quantitative easing (QE) in the single currency bloc.
In China, Q1 GDP, industrial output for March and retail sales of social consumer goods all are set to be released this week. China’s Q1 GDP, however, is unlikely to come in encouraging given soft PMIs and industrial output over the last three months, but if reports are disappointing, expectations will grow for new pro-growth policies from the Chinese government.
LME aluminum, zinc, tin, and nickel all have risen above major moving averages, while LME lead also has snapped its earlier losing streak, with technical indicators positive for the near term. In China’s physical lead markets, most base metals producers and traders are now disinclined to trade, which is pushing up spot premiums over the most active SHFE lead contract price. Moreover, lead supply is relatively scarce in the market as Henan Yuguang Gold & Lead, Yunnan Chihong Zn & Ge, Guangxi Chengyuan Mining & Smelting, and Jiangxi Copper have entered maintenance cycles, helping support lead prices.
30% of the surveyed hold that lead prices will be range-bound this week. A series of economic reports out of China will be under the spotlight this week, but are expected to be rather lacklustre, Meanwhile, China’s Premier Li Keqiang reiterates that the Chinese government will not introduce significant pro-growth policies for the near term, calming market speculation to some extent. In this context, investors will be again concerned over a slowdown in the Chinese economy, which should drag down base metals prices. A possible fall in the euro zone’s March CPI is expected to rekindle deflation concerns. After a decline in the euro against the US dollar and potential corrections in oversold conditions, the US dollar index looks set to rebound this week. In addition, capital flows in China could be further strained due to submission of taxes by enterprises this week, while the lingering Ukraine crisis will also put downward pressure on lead prices.
The remaining 10% are bearish, believing that spot lead prices will fall back this week to the RMB 13,600-13,700/mt trading range. Downstream lead-acid battery producers will cut back on production due to poor sales and mounting finished goods inventories. In addition, positions for the SHFE 1404 lead contract gained by more than 2,000 lots in two days with increasing buying interest at low prices. Positions now stand at 6,500 lots, which should increase lead ingot supply in the market after the delivery date.