SMM Lead Market Daily Review (2015-3-16)

SHANGHAI, Mar. 17 (SMM) – SHFE 1505 lead contract prices opened at RMB 12,300/mt last Friday evening, then followed a downward track, closing at RMB 12,160/mt. Trading volumes were 2,044 lots, and total positions increased 138 lots to 16,912.

The May-delivery lead hit a high of RMB 12,295/mt helped by shorts closing positions, and ended down RMB 50/mt at RMB 12,280/mt. Trading volumes increased 1,660 lots to 4,820 lots, and positions declined 222 to 16,552.

23% of the 30 market players surveyed by SMM are bullish that LME lead will rise above USD 1,800/mt and spot lead prices in China will increase to RMB 12,300-12,500/mt, arguing that the US dollar, though still strengthening, is having less impact on metal prices, an indication growing long positions in the metal. In this context, the arrival of high demand season and optimism over China’s economic reform will boost the market.

In China, the suspension of Anhui Tongguan and Chihong Zn & Ge triggered concerns over primary lead supply. Meanwhile, environmental protection crackdowns left low operating rates at secondary lead smelters. The declining lead supply and expectations of a pick-up in consumption will proffer support to prices.

27% of the surveyed, however, are pessimistic, expecting LME lead to drop to USD 1,750-1,800/mt and spot prices to fall to RMB 12,250-12,350/mt. On the macro front, rising expectation of interest rate increase before the Fed’s policy meeting will leave the US dollar index high, pressuring metal prices. Besides, the conclusion of NPC and CPPCC sessions will leave few opportunities for speculation.

As for market fundamentals, LME lead inventories soared 16,000 mt last Friday, igniting worries over European lead consumption and placing heavy pressure on LME lead prices.

In Chinese market, the resumption of secondary lead production after the Lantern Festival March 5 means lead supply will not fall short even after primary lead smelters halt production.

The remaining 50% of market players expect lead prices to hold steady this week, noting that base metals will show lukewarm reaction to any further strengthening of the dollar, and downward room for lead prices will be limited. Meanwhile, a lack of favorable news will also leave slim chance of any rally in lead prices.