SHANGHAI, Jun. 24 (SMM) – The most active SHFE 1408 lead contract swung between RMB 14,085-14,130/mt after starting last Friday’s night session at RMB 14,100/mt, and ended up RMB 40/mt at RMB 14,110/mt. During the night session, trading volumes for the contract totaled 122 lots, and positions added 10 lots to 6,316 lots.
On Monday, SHFE lead prices initially sank to RMB 14,075/mt, but advanced to an intraday high of RMB 14,075/mt during the afternoon trading session before finishing up RMB 60/mt at RMB 14,130/mt. Trading volumes amounted to 1,498 lots, and positions gained 572 lots to 6,878 lots. The most active SHFE 1408 lead contract has found base support at RMB 14,100/mt.
In the Shanghai physical lead market, goods from Chihong Zn & Ge traded Monday at RMB 13,940-13,950/mt, a RMB 150/mt discount over the most active SHFE 1408 lead contract. Small quantities of supply from Chengyuan were offered at RMB 13,950/mt. Traded prices were RMB 13,930/mt for Humon brand and RMB 13,900/mt for Hanjiang and Shuangyan brands. Despite higher selling interest at lead smelters overall, lead supply in the Shanghai market failed to increase significantly at the mid-year point. Meanwhile, traders turned less willing to move goods due to unfavorable physical discounts and extremely weak downstream buying interest. Market insiders expect purchases at downstream producers to become slower at the end of June.
SMM has carried out a survey of 30 market insiders of late on lead price movements for this week. It turns out 63% of the surveyed expect LME lead prices to hold flat at USD 2,120-2,160/mt and physical lead prices at RMB 13,850-14,000/mt.
On the macroeconomic front, base metals markets seem to have digested a boost from the Chinese Premier Li Keqiang’s statements of ensuring a 7.5% GDP growth for 2014. HSBC’s China flash manufacturing PMI for June, however, far exceeded the reading in May and stood above the 50 mark that separates expansion from contraction. Meanwhile, the US PCE price index, as a measurement for the US Federal Reserve in deciding on the timing of an interest rate hike, will be released this week. Nevertheless, impacts from the index on base metals markets remain uncertain. Lead-acid battery consumption has entered a seasonal low-demand period as temperatures in Europe and the US are rising, not boding well for lead fundamentals. Technically, lead prices are likely to trade in ranges with both upward resistance and base support.
In China, production at lead smelters is still restrained by decreasing raw material on account of low lead concentrate output at home and the persistently unfavorable Shanghai/LME lead price ratio. In addition, purchases by downstream producers are also not expected to improve in the last week of June.
The remaining 37% of the respondents are bullish, believing LME lead prices will rise to USD 2,160/mt and physical lead prices will advance to the RMB 13,950-14,050/mt range this week. They hold base metals prices will take heart from a series of Chinese economic stimulus measures as well as steadily recovering European and US economies. On a fundamental point of view, data from the National Bureau of Statistics show China’s refined lead output fell by 6.26% YoY in the first five months. This, combined with positive demand from downstream producers, is forecast to help drive up lead prices this week.