SMM Lead Market Daily Review (2015-7-13)

SHANGHAI, Jul. 14 (SMM) – Last Friday evening, SHFE 1509 lead opened at RMB 12,970/mt and ended at RMB 12,920/mt, down RMB 50/mt.

Market sentiment turned downbeat due to lingering Greek cash crisis. SHFE lead fell to RMB 12,850/mt immediately after opening Monday trading session. China’s import and export data for May beat estimate but China Customs reported great pressure in the following months due to falling trades with Japan and the EU. SHFE lead dived to RMB 12,770/mt with shorts gathering strength, to finish down RMB 130/mt at RMB 12,840/mt.

Nanfang brand quoted RMB 13,300/mt in spot market with few trades made. Hanjiang and Humon brands were offered RMB 330/mt higher than SHFE 1509 lead at RMB 13,200/mt, versus RMB 13,100/mt for Shuangyan brand (packed in iron).

Spot prices held firm in Shanghai due to tight supply as shipments from Guangxi Chengyuan Mining & Smelting and Hechi Nanfang Nonferrous Metals Group were delayed owing to the   typhoon. Wait-and-see sentiment loomed market, leaving trades soft.

SMM survey of 30 industry insiders reveals that half of them see lead prices to fall this week, with LME lead touching USD 1,750/mt and spot lead price in China retreating to RMB 13,000/mt. Although Greece has struck a deal with international creditors, its impact on the market will be limited. Besides, influence of Chinese A-shares on base metal markets will also recede. In this context, the strong US dollar, China’s economic slowdown and weak fundamentals in the offseason will combine to push down lead price. Lead demand from downstream producers is weak as low battery prices and high finished goods inventories will continue to curb battery production.

Only 7% of the surveyed are bullish that LME lead will rise to USD 1,850/mt and spot lead prices will edge higher to RMB 13,200-13,300/mt. The settlement of Greek debt issue and continued increase in China’s stock prices will boost market sentiment, lending support to metal prices. These players also argue that secondary lead prices in China hold firm on tight scrap battery supply and higher costs resulting from a VAT rebate cut, which may also bode well for lead prices.

The remaining 43% expect lead prices to remain steady this week due partly to stabilizing Chinese stock market. Net long positions in lead stopped falling, and technical support has formed at lower price levels. But poor lead consumption in China will leave little momentum for price to move higher. In spot market, limited supply and weak demand will trap prices in the current moving range.