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SMM Lead Market Daily Review (2014-8-4)
Aug 4, 2014 18:03CST
Source:SMM
In the Shanghai physical lead market, goods from Chihong Zn & Ge, Nanfang, and Chengyuan initially traded Monday at RMB 14,800/mt.

SHANGHAI, Aug. 4 (SMM) – In the Shanghai physical lead market, goods from Chihong Zn & Ge, Nanfang, and Chengyuan initially traded Monday at RMB 14,800/mt, a RMB 120-130/mt discount over the most active SHFE 1410 lead contract. Traded prices for these brands later fell to RMB 14,780/mt, dipping to as low as RMB 14,760/mt. Shuanyan and Humon resources were sold at RMB 14,770/mt and RMB 14,710-14,720/mt, respectively.

Lead smelters expressed higher selling interest after lead prices leveled out, but a relatively small price gap between SHFE lead and physical lead turned traders disinclined to buy. A small number of downstream producers conducted purchases to maintain production, but overall trading activity remained light. Lead-acid battery producers are now largely depleting finished goods inventories since rising costs of raw material squeezed their profit margins.

The most active SHFE 1410 lead contract opened last Friday’s night session at RMB 14,765/mt, and rose to as high as RMB 14,930/mt before ending up RMB 95/mt at RMB 14,875/mt. During the night session, total trading volumes were 68,230 lots, and positions were up by 7,672 lots.

On Monday, SHFE lead prices hovered between RMB 14,900-15,000/mt during the morning trading session, but fell to a trough of RMB 14,765/mt subsequently before closing up RMB 60/mt at RMB 14,840/t. Trading volumes for the SHFE 1410 lead contract totaled 123,992 lots, and positions gained 6,380 lots to 43,524 lots on Monday.

SMM has recently conducted a survey of 30 market insiders on lead price movements for this week. It turns out that 50% of the surveyed are bearish, expecting LME lead prices to test support at USD 2,200/mt and physical lead prices to fall slightly to RMB 14,500-14,600/mt.

The Bank of England and European Central Bank both will this week release their respective interest rate decisions at the latest policy meetings. A series of economic reports, including eurozone July composite PMI, US June factory orders growth, and the ISM non-manufacturing PMI, will all be made public as well. Even if US economic data do come in positive, investors will interpret this as a factor to prompt the US Federal Reserve to raise interest rate sooner than expected. The resultant higher US dollar index is expected to weigh down base metals prices.

Meanwhile, several technical indicators are negative, heaping pressure on base metals prices. In addition, soft demand from downstream producers will also depress prices. Most lead smelters and traders reported that downstream producers cut back on purchases after lead prices surged last week. Some small and medium lead-acid battery producers curtailed or suspended production amid towering finished goods inventories and a spate of promotions, undermining demand for lead ingot. The improved Shanghai/LME lead price ratio also means that previous speculation on lead is about to end this week.

27% of respondents, however, project that LME lead prices will rebound to USD 2,250/mt and physical prices will rise to the RMB 14,800-14,900/mt range this week, reaching as high as RMB 15,000/mt. They hold that there is still upward room for LME lead prices given solid support at the USD 2,200/mt mark and the narrowing cash-to-three-month price spread.

SHFE lead prices have steadied after falling for a third straight trading day, with buying force and positions both rising, which has turned investors bullish.

The remaining 23% believe that lead prices will largely trade in ranges this week.
 

 
 

SHFE lead prices
physical lead prices

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