SMM Lead Weekly Price Review and Forecast (Jul. 21-25, 2014)

SHANGHAI, Jul. 22 (SMM) – The most active SHFE 1408 lead contract last week was resistant to declines and rose RMB 5/mt from the previous week, hovering largely between RMB 14,000-14,100/mt, with trading volumes down markedly. Prices for the most active contract are forecast to fluctuate essentially between RMB 14,000-14,150/mt this week.

After SMM #1 lead prices climbed RMB 50/mt last Monday, lead smelters turned unwilling to sell, but traders and downstream producers were actively buying, resulting in shortages of supply. As lead prices rose at a slower pace, lead smelters ramped up sales, but downstream producers turned wary of purchases, sending trading volumes down. Physical lead prices in Shanghai traded near the highs of SMM #1 lead prices due to tight supply. Physical prices in Henan ranged from lows up to the average of the SMM #1 lead prices, as regional supplies of low-priced material decreased. Small volumes of lead were offered at a RMB 70/mt discount over the average SMM #1 lead price in Jiangxi and at a RMB 100-150/mt discount in Hunan.

In China’s physical lead markets, prices should trade this week between RMB 13,900-14,050/mt. Lead smelters will be reluctant to move goods on a view that prices will rise, and should trade in limited volumes despite pressure from repaying banking loans at the end of July. Downstream producers with sufficient cash flows are expected to further build raw material stocks should lead prices continue to rise. Meanwhile, automobile ignition battery producers will also step up buying lead with the arrival of a high demand season.