SHANGHAI, Jul. 21 (SMM) – SHFE 1510 turned to the most active contract, to open last Friday evening session at RMB 12,930/mt and grew to RMB 13,020/mt. But later, the price fell below RMB 13,000/mt and ended at RMB 12,985/mt, up RMB 30/mt.
At 9:30 Monday, gold prices hit a 5-year low due to tumbling net long positions as Yellen’s speech raised hopes for interest rate hike this year. SHFE 1510 lead dipped to RMB 12,880/mt and then followed gold prices up. The price hovered between RMB 12,920-12,940/mt in the afternoon, to close at RMB 12,940/mt, falling RMB 10/mt. Trading volumes totaled 1,460 lots with positions up 674 to 13,096.
In Shanghai market, Nanfang and Chengyuan brands quoted RMB 13,320-13,330/mt, a premium of RMB 240/mt over SHFE 1509 lead, versus RMB 13,280-13,290/mt for Humon and Hanjiang brands and RMB 13,130-13,140/mt for Shuangyan brand (packed in iron).
Jincheng Chengyuan Smelting, Shandong Humon Smelting and Western Mining all moved goods. Nanfang and Chengyuan brands quoted higher due to shortage, leaving few deals made. But trades for Humon brand were active. Buying interest of downstream buyers stayed low. Though stocks of finished products at motive battery markers slipped and many regional battery prices have grown, operating rate at battery producers failed to pick up.
SMM survey of 30 market players showed that 47% of them to see LME lead to fall below USD 1,800/mt this week and China spot lead to slip to RMB 13,150-13,300/mt. On the macro side, US Fed’s speech raises hopes for interest rate hike this year. The Wall Street Journal reported net long positions hit a fresh low in precious metal market and the plunging precious metal prices will extend to base metal market.
China’s three major share-index futures were delivered successfully last week. Then, news come that China Securities Regulatory Commission considers withdrawing funds from stock market, weighing down China’s A-shares. Market confidence is thus depressed, boding ill for base metals.
Longs continue to exit market flowing rising LME lead prices due to shorts’ closing positions, meaning a shortage in longs. Besides, strong resistance has emerged at USD 1,850/mt, pressing LME lead prices. In China, weak downstream demand and high temperature curb downstream operating rate. Consumption of primary and secondary lead stays sluggish, which will not lend support to lead prices.
40% industrial insiders hold that LME lead and China spot lead prices will remain flat this week, citing a lack of major reports. Greece’s Parliament has approved austerity measures and China’s stock market tends to be stable. Both supply and demand remain anemic in domestic spot market. Spot availability turns tight in Henan as Jinli Lead and Jiyuan Wanyang Smeltery Group conducted maintenance unexpectedly, boding well for spot prices. But poor downstream consumption still exists. Hence, China spot prices should hold flat this week.
The rest 13% point out that LME lead may grow to USD 1,900/mt this week and China spot lead will be up to RMB 13,300-13,400/mt. Good news from China stock market and Greek will drive market confidence up. Lead shipped from LME lead stocks last week arrived to Korea. Net long positions also start to rise, favoring LME lead prices.
In domestic market, spot supply falls owing to falling production in Henan and price wars starting June have markedly cut inventories at downstream battery makers. Also, operating rate at battery producers has not fallen further yet, mirroring a recovery in fundamentals. Therefore, spot prices are expected to increase.