SHANGHAI, Aug. 5 (SMM) – SHFE lead posted a rise of 1.14% as of 11:30 Wednesday morning, compared with limited rallies in other base metals prices. Then, what has lent support to SHFE lead prices?
Chances exist for short squeeze. Current positions of SHFE 1508 lead require 7,800 tonnes to be delivered, and there are 8,213 tonnes in SHFE warehouses. Once longs take up the majority of inventories in SHFE warehouses, shorts may have to exit market due to a lack of goods for delivery.
Spot premiums stay as high as 300-600 yuan per tonne and market inventories continue to fall. This may shift speculators to be bullish. A large number of lead smelters conducted maintenance previously, leaving spot supply tight in market, boding well for lead prices.
There are only over 70,000 tonnes of spot lead available in Shanghai and Guangdong currently, versus 260,000 tonnes mid 2013, SMM learns.
That being said, lead smelters gradually resume operation in August, driving supply up. Meanwhile, motive batteries enter a peak season in August, but end-user consumption has not improved. Additionally, a 175-yuan-per-tonne price gap August 4 lures battery makers to buy secondary refined lead instead of primary lead. As such, SMM expects the price increase to slow.
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