SMM Lead Market Daily Review (2015-4-7)

SHANGHAI, Apr. 8 (SMM) – SHFE 1506 lead contract prices climbed rapidly before midday of Friday as long positions grew, and closed the day up RMB 190/mt at RMB 12,660/mt. Trading volumes were 3,838 lots and positions increased 812 to 13,422. Tight supply in spot lead prices also helped bolster SHFE lead.

Goods of Chihong Zn & Ge quoted at RMB 12,680-12,800/mt, and those of Nanfang and Chengyuan were offered at RMB 12,650-12,680/mt, with premiums of RMB 0-20/mt to SHFE 1506 copper contract prices. Humon, Shuangyan and Hanjiang were offered at RMB 12,630-12,640/mt. Smelters refrained from selling, while traders offered high prices. Downstream buyers held on the sidelines against high quotations. In Henan, lead was offered at premiums of RMB 0-50/mt to SMM refined lead prices. Discounts in Hunan and Jiangxi narrowed.

SMM’s survey of 30 industry insiders shows that 70% of them expect lead prices to increase this week, with LME lead heading to USD 1,920/mt and spot lead prices in China rising to RMB 12,600-12,800/mt.

On the macro front, the weak nonfarm payroll figures in the US and dovish attitude of the Fed’s officials may leave US dollar relatively weak. China loosened its property curb, which combined with the “One Belt, One Road” program, will help consume excess capacity in nonferrous metals industry. Besides, monetary easing in a number of economies will provide liquidity for investment. Meanwhile, the previous increases in US shares may mean higher risk in stock market. This will shift some investors to nonferrous metals.

Technically, LME lead has stood above the 20-day moving average. In addition, spot lead supply in China is tightening, with bullish smelters holding goods back. At the same time, operating rate at motive battery producers stays high and the rate at ignition battery makers is improving, meaning lead consumption will grow, which will also boost prices.

7% of industry insiders are bearish about prices, believing LME lead will fall back to USD 1,850/mt and spot lead prices will decline to RMB 12,450-12,600/mt.

The unresolved Greek debt issue may cause the euro to weaken, in turn pushing up the US dollar index. In China, although new policies were rolled out to bolster housing demand, some hold that investment in property market remains slow. As for the “One Belt, One Road” plan, no concrete actions have been taken thus far. Rather, most industrial companies are still distressed by tight liquidity, slipping profits, and weak sales.

In addition, the rallying Chinese stocks attracted a large number of funds, reducing capital flowing into nonferrous metals sector. In physical market, some players noted that smelters will start shipping out goods once financial pressure grows, depriving prices of any impetus to increase.

The remaining 23% expect lead prices to stay in the current range, arguing that impact of recent reports from the US and China has started receding. Besides, these players hold that the recent rises in lead prices were technical rebounds following sharp declines earlier, and lead prices now lack more momentum to grow further.