SHANGHAI, Aug. 26 (SMM) – Lead for October delivery, the most active contract on the Shanghai Futures Exchange, dipped to a trough of RMB 14,570/mt after opening at RMB 14,650/mt, and finished down RMB 45/mt at RMB 14,590/mt. Trading volumes for the SHFE 1410 lead contract totaled 12,744 lots, and positions added 268 lots to 29,504 lots.
On Monday, SHFE lead initially sank to RMB 14,480/mt, finding support at the 40-day moving average, and ended down RMB 150/mt, or 1.02%, at RMB 14,485/mt. Trading volumes for the SHFE 1410 lead contract tumbled 6,484 lots to 7,484 lots, while positions shed 1,124 lots to 28,112 lots. The most active SHFE 1410 lead contract is expected to continue testing support at the 40-day moving average for the near term amid weak fundamentals.
In the Shanghai physical lead market, goods from Chihong Zn & Ge traded Monday at RMB 14,390-14,400/mt, an around RMB 120/mt discount over the most active SHFE 1410 lead contract. Traded prices were RMB 14,360-14,380/mt for Chengyuan brand and RMB 14,350-14,360 for Humon brand. After SHFE lead prices fell, lead smelters moved goods in light volumes, but traders ramped up deliveries with a narrower price gap between SHFE and spot lead. Some downstream producers went bargain-hunting, leaving trading activity brisker than last week.
SMM has recently conducted a survey of 30 industry insiders on lead price movements for this week. It turns out that 60% of the surveyed expect LME lead to hold flat this week at USD 2,230-2,280/mt and SHFE lead at RMB 14,400-14,700/mt.
US Federal Reserve Chairwomen Janet Yellen made hawkish comments on the US job market at the Kansas City Fed’s annual Jackson Hole conference last Friday, while other Fed policy makers called for an interest rate hike. In response, the US dollar index staged a rally, which will limit upside room in LME lead. In addition, LME lead prices are now confronting resistance at USD 2,280/mt, and positions are decreasing in the process of price rally, a sign of a lack of buying force. Nevertheless, the price of the soft metal is expected to be underpinned by the LME cash-to-three-month backwardation hitting a refreshed high since the start of the year.
40% of respondents are bearish, holding that spot lead prices will slide to a RMB 14,200-14,300/mt range. Lead smelters will become more willing to move goods against tight cash flows and towering finished goods inventories. Traders will be reluctant to buy this week after building large stocks due to the wide price gap between SHFE and physical lead last week. Meanwhile, lead-acid battery producers are expected to buy in an extremely small volume against the backdrop of tight liquidity and low operating rates.