SHANGHAI, Oct. 9 (SMM) – The most active SHFE 1411 lead contract fell to RMB 13,850/mt after starting Wednesday at RMB 13,900/mt. The price of the contract rallied rebounded to RMB 13,910/mt, and ended up RMB 75/mt, or 0.54%, at RMB 13,910/mt. Trading volumes totaled 1,308 lots, and positions shed 312 lots to 15,144 lots. SHFE lead is expected to rise for the near future given positive technical indicators and speculation about a broad interest rate cut in China.
On the Shanghai physical lead market, Chihong Zn & Ge, Nanfang, and Chengyuan brands traded Wednesday at RMB 13,750/mt, a RMB 130/mt discount to the most active SHFE 1411 lead contract. Hanjiang and Humon brands were sold as low as RMB 13,700-13,710/mt at some point, but later were quoted higher at RMB 13,750/mt. Lead supply was relatively tight on Wednesday since traders barely moved goods after depleting inventories before the Chinese National Day holiday. Downstream producers went bargain hunting to replenish raw material inventories.
SMM has recently conducted a survey of 30 industry insiders on lead price movements for this week. 60% of the surveyed expect LME lead to rise to USD 2,100-2,130/mt and spot lead to climb to RMB 13,750-13,850/mt, citing bullish positive indicators and fundamentals. LME lead inventories for the week ending October 4 rose by only 50 mt, easing downward pressure on lead prices. Meanwhile, a surge in LME zinc will likely push up the price of lead, extracted from lead-zinc concentrate. On China’s physical lead markets, lead-acid battery producers are actively replenishing raw material inventories. Lead smelters and traders, however, held low finished goods stocks, which results in tight lead supply and in turn should help boost prices.
The remaining 40% of respondents believe that LME lead will hold steady at USD 2,070-2,100/mt and spot lead at RMB 13,700-13,800/mt this week amid mixed news. Speculation grows over an interest rate increase by the US Federal Reserve following the encouraging nonfarm payrolls released last week. This, combined with ongoing geopolitical crisis in Ukraine and Syria, will give a boost to the US dollar, but will hurt risk appetite in base metals. In addition, China’s property market, accounting for almost 20% of its GDP, continues to struggle despite a flurry of stimulus measures unveiled recently, raising concerns over base metals demand in the second largest economy in the world. On the other hand, LME and SHFE lead both have found solid support. In this context, lead prices should trade in ranges this week.