SMM Lead Market Morning Review (2015-1-13)

SHANGHAI, Jan. 13 (SMM) – LME lead started Monday at USD 1,860/mt and moved around USD 1,850/mt in the Asian trading session. During European and US trading hours, the price of the soft metal slid to USD 1,837/mt, but rebounded at the tail of the trading to close at USD 1,861/mt. Trading volumes for three-month lead on the London Metal Exchange gained 705 to 4,180 lots, while positions added 1,251 to 117,298. LME lead inventories decreased 625 mt to 220,150 mt on Monday.

Lead for March delivery on the Shanghai Futures Exchange, the most active contract, rose to RMB 12,250-12,280/mt after opening Monday’s night session at RMB 12,200/mt and ended down RMB 45/mt at RMB 12,305/mt. Trading volumes for the SHFE 1503 lead contract totaled 6,004 lots, while positions shed 30 to 24,400.

West Texas Intermediate (WTI) crude closed down 4.7% at USD 46.07/bbl on Monday. Goldman Sachs slashed its projection for this year’s average WTI crude price from USD 73.75/bbl to USD 47.15/bbl and 2016’s average to USD 65/bbl. The billionaire Saudi prince Alwaleed bin Talal asserted in an interview that oil prices are not expected to rebound to USD 100/bbl anymore and may fall further should supply stay at current levels and demand remain soft.

The US dollar index finished down at 91.996 on Monday amid speculations that the unexpected decline in wages may leave the US Federal Reserve patient on an interest rate hike. The Fed’s Labor Market Conditions Index, published on Monday, rose to a seven-month high of 6.1 in December. However, the Information Technology & Innovation Foundation, a non-partisan and nonprofit think tank, reported that the US manufacturing recovery is nonexistent. The nonprofit indicated that the US may have added only about one new manufacturing job in the last few years for every five that were lost during the financial crisis and the recession that followed.

COMEX gold ended up 1.4% at USD 1,232.80/oz on Monday, helped partly by a dip in the US dollar index. Crude oil fell further, which increased risk aversion sentiment and prompted investors to flow from crude and stocks to gold and bond markets.

European stocks rebounded, but US stocks extended losses. The 10-year Treasury yield slipped to a new 1.5-year low. LME lead and tin closed higher, but other base metals fell, with copper down below USD 6,000/mt, the lowest since 2009.

As such, LME lead is set to hover at USD 1,840-1,870/mt on Tuesday, while the most active SHFE 1503 lead contract is expected to move at RMB 12,160-12,360/mt. Spot lead prices in China should range between RMB 12,450-12,600/mt.