SMM Lead Market Morning Review (2014-12-18)

SHANGHAI, Dec. 18 (SMM) – LME lead started Wednesday at USD 1,918/mt and held steady in the Asian trading session with light trading. The price of the soft metal trended down in European trading hours and closed down USD 34.5/mt at USD 1,883/mt. Trading volumes for three-month lead on the London Metal Exchange gained 670 lots to 6,373 lots, while positions shed 4246 lots to 112,026 lots. LME lead inventories were unchanged at 220,175 mt on Wednesday.

Lead for February delivery on the Shanghai Futures Exchange, the most active contract, finished lower at RMB 12,220/mt in Wednesday’s night session. Trading volumes for the SHFE 1502 lead contract surged 10,170 lots.

The US Federal Reserve left its federal fund rate unchanged at 0~0.25% on Wednesday, but moved away from the statement of keeping low rates for a considerable period of time to a patient normalization of monetary policy. Fed Chairwomen Janet Yellen stated in an ensuing press conference that external economic risks from Russia and the euro zone will have limited impact on the US economy. She added that the Fed will not initiate the normalization of interest rates in the next two meetings. In response, the US dollar index closed up 1.28% at 89.04 on Wednesday.

US seasonally adjusted CPI declined 0.3% in November, the biggest monthly fall in nearly six years and higher than a 0.1% drop expected. The index rose 1.3% YoY for the same month, shy of the estimated 1.4% and 1.7% in October. The nation’s current account deficit expanded from USD 98.5 billion in Q2 to USD 100.3 billion in Q3.

Nymex crude oil ended up 1% at USD 56.47/bbl on Wednesday, rising 5.5% at one stage. The US Energy Information Administration (EIA) reported that crude oil inventories shrank 800,000 barrels, helping undergird oil prices. Russia’s Treasury Department decided to sell 7 billion USD at its disposal to counter the tumble in the Rouble and claimed that it will continue to do so if need be. Russia’s central bank announced a flurry of measures aimed at stabilizing financial markets. Oil prices across the world surged 5% at some point and finished up 1% at USD 56.47/bbl, while Russia rebounded 12%, posting the biggest rise since 1998.

US stocks soared on Wednesday, with the Dow up 1.69% and the S&P 500 and Nasdaq both up over 2%. Gold ended down 0.63% at USD 1,189.78/oz. LME copper, aluminum and zinc closed slightly higher, but lead, tin and nickel finished lower.

The sharp rebound in the US dollar index and a possible further slide in crude will depress base metals prices on Thursday. LME lead is expected to hover at USD 1,860-1,890/mt, while the most active SHFE 1502 lead contract is set to move at RMB 12,100-12,400/mt. Spot lead prices in China should range between RMB 12,650-12,800/mt on Thursday.