SMM Lead Market Morning Review (2014-6-13)

SHANGHAI, Jun. 13 (SMM) – LME lead prices overnight started at an intraday high of USD 2,122/mt, and then hovered mostly around the opening mark during Asian trading hours. During European and US trading hours, the metal sank as low as to USD 2,070/mt, and closed down USD 44.8/mt, or 2.11%, at USD 2,072/mt. Traded volumes gained 2,132 lots to 6,531 lots, and positions shed 658 lots to 127,275 lots. Meanwhile, the latest LME lead inventories lost 500 mt to 191,275 mt.

Lead for August delivery, the most active contract, started Thursday’s night session at RMB 14,035/mt on the Shanghai Futures Exchange, and then trended lower to end down RMB 80/mt at RMB 13,965/mt. During the night session, traded volumes for the most active contract were 168 lots, and positions were off 64 lots to 5,348 lots. No transactions were reported for the SHFE 1406 lead contract during the trading period.

On Thursday, al-Qaeda militants seized Iraq’s second largest city Mosul and the city of Tikrit in the north. When it comes to the intensifying situations, US President Barack Obama went on record as saying that he won’t rule out anything to help Iraq’s government beat back Islamic militants. In response, precious metals rose, but major stock indices across the world fell. The West Texas Intermediate (WTI) crude oil prices climbed above USD 106 per barrel, up 1.8% to a fresh high since September 2013 on supply concerns. Brent crude oil prices also went up by more than 2% to USD 112 per barrel. Prices for copper, as strategic material, however, extended losses due to the ongoing probe into fraudulent financing at the Chinese port of Qingdao, and other base metals prices also dropped.

US retail sales inched up 0.3% MoM in May, well below expectations. The number of claims for first-time jobless benefits unexpectedly rose last week to 317,000. In response, Goldman Sachs lowered its outlook for US Q1 GDP growth to 2.9% from 3.0%, weighing down the country’s major stock indices.

Meanwhile, the People’s Bank of China (PBOC) announced Thursday that China’s social financing totaled RMB 1.40 trillion in May, down RMB 145.4 billion MoM, but up RMB 217.4 billion YoY. The social financing grew 18% from a year ago, compared to March and April’s 19% and 12% falls, respectively. The country’s new yuan-denominated lending reached RMB 870.8 billionin May, beating the estimated RMB 750 billion and hitting a new high in more than 10 years. In addition, the PBOC withdrew RMB 40 billion from the open markets through the 28-day repurchases, and injected RMB 104 billion, in relation to last week’s RMB 73 billion.

The ongoing investigation at the Port of Qingdao and escalating tensions in Iraq should stoke uncertainties in base metals markets on Friday. With the lack of support from fundamentals, lead prices look set to fall in the near term. LME lead prices are expected to move between USD 2,060-2,090/mt, and the most active SHFE 1408 lead contract is set to hover between RMB 13,900-14,000/mt. In China’s physical lead markets, traded prices should be in the RMB 13,850-14,000/mt range on Friday.