SHANGHAI, Jun 4 (SMM) – The most active SHFE 1407 lead contract started RMB 60/mt higher at RMB 14,045/mt Tuesday, boosted by a USD 30/mt rise in LME lead prices last Friday. LME lead prices fell afterwards, while HSBC’s China final manufacturing PMI for May was reported at 49.4, missing April’s figure and the estimated 49.7. In response, SHFE lead prices dipped as low as RMB 13,970/mt, but rebounded to 13,995/mt during the afternoon trading session before ending up RMB 15/mt at RMB 14,000/mt. Traded volumes totaled 504 lots, while positions lost 280 lots to 4,748 lots.
In China’s physical lead market, traded prices for Chihong Zn & Ge brand initially were RMB 13,950-13,960/mt, a discount of around RMB 20/mt over the most active SHFE 1407 lead contract, but later fell to RMB 13,930/mt on Tuesday. Goods from Nanfang brand were barely traded due to high quotes. Traded prices were RMB 13,930/mt for Humon resources and RMB 13,910-13,920/mt for Shuangyan and Hanjiang supply. Lead smelters continued to move goods normally to alleviate pressure from bank loans repayment, leaving relatively ample supply in the market. Nonetheless, lead-acid battery producers expressed rather low willingness to build stocks due to poor orders, tight liquidity, as well as mounting inventories.
Recently, SMM has conducted a survey of 30 industry insiders on lead price movements for the first week immediately after the Dragon Boat Festival holiday. It turns out that 57% of the surveyed expect LME lead prices to hold steady at USD 2,120/mt and spot lead prices at RMB 13,900-14,000/mt. On the macro front, a series of mini-stimulus policies unveiled by the Chinese government will help boost base metals markets, while declining home prices, fixed asset investment, as well as tight liquidity in July could hurt investor sentiment.
Meanwhile, positive expectations for US economic data will not give a significant boost to the markets. The European Central Bank is expected to launch accommodative monetary policy at this week’s interest rate meeting, which, however, will have limited impact due to the declining euro for a straight month. LME present lead inventories and cash-to-three-month contango also provide no clear guidance. China’s lead smelters should increase deliveries slightly this week, pressured by raw material shortages and tight cash flow. With the approach of the high consumption period in summer, output at lead-acid battery producers looks set to grow progressively.
33% of respondents believe that LME lead prices will fall to USD 2,100/mt and spot lead prices will drop to RMB 13,850-13,950/mt this week. They argue that the high consumption season for base metals has already disappeared and that the price rally starting from March was due mostly to speculation. In addition, lead smelters in maintenance cycles will gradually restart operations in June, helping inflate market supply, while current lead consumption is also soft, presaging a fall in lead prices.
The remaining 10%, however, hold an optimistic stance on lead prices this week, with LME lead prices up to USD 2,150/mt and spot lead prices up to RMB 13,900-14,050/mt. They hold that China’s mini-stimulus programs are beneficial for base metals markets and that US ADP jobs report and nonfarm payrolls both will come in encouraging this week. In addition, the European Central Bank is also more than expected to unveil easy monetary policy. In China’s physical lead markets, lead ingot supply will be unlikely to increase by large amounts due to shortages of lead concentrate. Lead-acid battery producers should gradually accelerate production as the brisk consumption season draws near.