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SMM Lead Market Morning Review (2014-6-4)
Jun 4,2014 09:48CST
price review forecast
LME lead prices are expected to move between USD 2,120-2,140/mt, while the most active SHFE 1407 lead contract is set to fluctuate between RMB 13,950-14,050/mt.

SHANGHAI, Jun. 4 (SMM) – LME lead prices overnight started at USD 2,116.5/mt, and then fell below USD 2,110/mt, pressured by downbeat HSBC’s China final manufacturing PMI. During European and US trading hours, the metal swung by more than USD 20/mt with mixed economic data from Europe and the US, and closed up USD 11.5/mt at USD 2,134/mt.

Lead for July delivery, the most active contract, sank as low as RMB 13,955/mt after starting Tuesday’s night session at RMB 14,020/mt, and ended up RMB 10/mt at RMB 13,995/mt on the Shanghai Futures Exchange. During the night session, traded volumes totaled 10 lots, while positions gained 4 lots to 4,752 lots.

HSBC’s China final manufacturing PMI for May released early on Tuesday rose to a fresh 4-month high of 49.4, but was down slightly from the preliminary 49.7. The sub-index tracking new orders stabilized following a 3-month losing streak, while overseas demand showed signs of expansion. The sub-index for new export orders climbed sharply to 53.2, its biggest rise since April 2010, but the sub-index for manufacturing output contracted slightly, down for a fourth month in a row. The sub-index measuring finished goods inventories rose to 49.8 in May from its flash reading, but was down from April’s level and for the first time this year. Despite the improved manufacturing activity in May, it is still far too early to claim that the Chinese economy is bottoming out against the sluggish property market.

Data from the Eurostat revealed Tuesday that the euro zone’s CPI declined to 0.5% in May, down from April’s 0.7%, in a sign that the single currency bloc was still plagued with deflationary risks. Mario Draghi, President of the European Central Bank, went on record as saying that the ECB was poised to deal with any potential problems against a backdrop of persistently low inflation. In this context, market participants universally expect the ECB to lower its benchmark interest rate or even to adopt other accommodative monetary policies after this week’s meeting. Should the ECB cut the interest rate, the euro looks set to weaken against the US dollar, exerting downward pressure on base metals prices.

US factory orders growth reached 0.7% MoM in April, with March’s growth revised up to 1.5% from previous 0.9% and up for a third straight month, pointing to a steady recovery in the country’s manufacturing sector.

Most European and US shares closed down. The euro rose 0.22% against the US dollar. LME base metals were mixed.

Investors should keep an eye on US ADP jobs report and composite PMIs from euro zone member countries due for release on Wednesday. LME lead prices are expected to move between USD 2,120-2,140/mt, while the most active SHFE 1407 lead contract is set to fluctuate between RMB 13,950-14,050/mt. In China’s physical lead markets, traded prices should be in a RMB 13,900-14,000/mt band on Wednesday.

LME lead prices
SHFE lead prices
physical lead prices

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