SHANGHAI, Oct. 16 (SMM) – The Shanghai Futures Exchange (SHFE) announced September 29 that beginning with the SHFE 1502 lead contract, lead futures delivered at certified warehouses in Guangdong will be discounted at a rate of 130 yuan/tonne, Shanghai Metals Market learns.
The SHFE hopes to reduce high lead inventory pressures in Guangdong by discounting lead futures delivered to Guangdong warehouses.
As of Oct. 3, SHFE lead inventories totaled 73,782 tonnes, of which 50,362 tonnes or 68.26%, were stored in Guangdong’s three warehouses.
A large number of downstream producers in Jiangsu and Zhejiang stand to benefit should Shanghai become the prime destination for lead futures delivery.
Many industry insiders project that lead smelters will gradually shift from Guangdong to Shanghai for delivery in response to the new regulation. Meanwhile, spot lead prices in Guangdong are expected to fall as low-priced deliverable goods flow elsewhere.
Nevertheless, a recent SMM survey reveals that some lead smelters see limited real impact from the discount rate on lead inventories in Guangdong and Shanghai, citing transportation fee differences.
The RMB 130/mt discount rate is more than offset by shipping fees from Hunan and Guangxi to Shanghai. Since most lead brands delivered to Guangdong warehouses are from Hunan and Guangxi, the new regulation is unlikely to have much impact.
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