SHANGHAI, Aug. 11 (SMM) – SHFE lead held strong around RMB 12,850/mt on Monday despite of China’s poor PPI and trade data. Then the contract advanced to RMB 13,110/mt as Chinese stocks headed for stability and ended up RMB 245/mt or 1.91% at RMB 13,060/mt. Trading volumes grew to 5,364 lots and positions rose 234 to 18,396.
In Shanghai market, traded prices were RMB 13,190-13,220/mt for Nanfang, Humon and Hanjiang brands, premiums of RMB 280/mt over SHFE 1510 lead. Later, the prices grew to RMB 13,300/mt but few deals were made. Jinyuteng brand quoted RMB 13,160/mt, versus RMB 13,070/mt for Shuangyan brand (packed in iron). Western Mining, Shandong Humon Smelting and Hechi Nanfang Nonferrous Metals Group moved goods out, but spot supply was still insufficient in market. Downstream buyers increased purchase due to expectation for spot price rises, resulting from surging SHFE lead prices Aug. 10.
SMM survey of 30 market players shows that 17% of them see LME lead to fall below USD 1,680/mt this week and China’s spot lead below RMB 13,000/mt. US non-farm payrolls number grew 215,000 in July, below previous 223,000 but still a high level, boosting hope for US Fed’s interest rate hike in September. Dollar increased initially but later fell with market sentiment eased. US dollar still poses pressures to lead prices.
Growth in China’s July PPI slipped faster and rise in export was far below estimates. Markets expect July’s year-on-year industrial output to be downbeat. Thus, weak consumption at home and aboard will not support lead prices. Besides, it is difficult for demand to really pick up. Demand from e-bike and auto sectors stays anemic, boding ill for lead prices.
Spot lead discounts widen. Henan-based spot lead turned to discounts of RMB 100/mt from a par against SMM #1 lead average price. Many traders are unwilling to buy even in this peak season. As such, lead prices will post a drop this week.
17% respondents note that LME lead will break out above USD 1,750/mt and that SHFE 1510 lead will hold stable around RMB 13,000/mt this week. Leading battery makers’ price hikes, followed by other battery makers, will excite operating rate at lead-acid battery producers, increasing demand for lead. Additionally, the rate will be stimulated by falling temperatures. This will also increase demand for lead and will thus support lead prices.
The rest of market players state that lead prices will hold flat this week with USD 1,700-1,750/mt for LME lead and RMB 13,100-13,300/mt for Chinese spot lead. Most investors are not bullish towards commodity prices but meanwhile lead prices have dropped to a low. Shorts will hence remain leery. Lead prices will be depressed by other base metals prices though technical indicators point upwards. Currently, batteries have entered a peak season but consumption in e-bike and auto sectors still stay sluggish. Consequently, lead prices should be left largely stable this week.