SMM Lead Market Daily Review (2015-4-13)

SHANGHAI, Apr. 14 (SMM) – SHFE 1506 lead contract prices opened at RMB 13,450/mt last Friday evening, reaching as high as RMB 13,500/mt and closing at RMB 13,350/mt, up RMB 320/mt..

The June delivery lead fell to RMB 13,240-13,260/mt after starting on Monday as China’s trade data turned out weak and LME lead prices slipped. China’s exports in March fell by 15% on the month and imports posted a 12.7% drop. The most active SHFE lead contract rose back to RMB 13,320/mt at the tail of trading supported by a wave of buying, and ended at RMB 13,320/mt, up RMB 290/mt. Trading volumes were 23,234 lots, and positions grew 2,138.

In spot market, quotations for the few goods from Chihon Zn & Ge were about RMB 12,350/mt on Monday, and Nanfang and Chengyuan brands were offered at RMB 12,220-12,250/mt, with discounts of RMB 0-30/mt to SHFE 1505 lead contract. Humon offered RMB 12,250/mt. Supply remained tight and traders held prices up for fear of difficulty in replenishing stocks. Downstream buyers shied away from high prices. Some smelters in Henan refused to sell spot goods and only fulfilled long-term contracts. Goods in Henan were quoted at premiums of RMB 0-80/mt to SMM refined lead prices. Quotes from Jiangxi were identical with SMM refined lead prices, while discounts in Hunan narrowed,

SMM’s survey of 30 industry insiders indicates that 53% of them are bullish about lead prices this week, with LME lead up to USD 2,000-2,050/mt and spot lead prices rising to RMB 12,300-12,500/mt, considering the followings:

First, market confidence restored with Chinese economic indicators and liquidity conditions improving. Meanwhile, the minutes from the Fed’s policy meeting and Greek debt crisis have been digested by the market, with their impact expected to recede.

Second, LME lead has climbed above the 20-day moving average with technical indicators still pointing upwards.

Third, LME lead inventories continued to decline, also boding well for lead prices.

Finally, an increasing number of smelters in China will begin maintenance operation, and smelters expecting prices to rise will be reluctant to sell. Meanwhile, the operating rate at lead-acid battery producers stays high, meaning lead demand should remain robust.

13% of the surveyed are bearish that LME lead will fall back to USD 1,950-2,000/mt and spot lead prices will decline to RMB 13,000-13,200/mt. These market players hold that the rebound in LME lead prices lately was mainly powered by a 100,000 mt increase in canceled warrants March 23, which is unlikely to bolster prices for long.

The remaining 34% of industry insiders expect lead prices to hold steady this week. These players told SMM that the sharp rise in lead prices last week were mainly driven by speculative capital, meaning the rebound may not last long. However, the upbeat macroeconomic conditions and market fundamentals will prevent prices from falling.