SHANGHAI, Sept. 29 (SMM) –Profit at China’s large industrials fell 8.8% in August, much more significant than the 2.9% drop in July, fueling market worries about China’s demand. SHFE 1511 lead contract prices opened at RMB 13,270/mt on Monday, and fell to RMB 13,200/mt. At the end of trading, SHFE 1511 lead contract prices plunged and closed at RMB 13,120/mt, down RMB 150/mt. Trading volumes were 3,444 lots. Total positions decreased 594 to 12,725.
Prices of Nanfang and Chengyuan lead were RMB 13,400-13,420/mt, with spot premiums of RMB 210/mt against SHFE 1511 lead contract prices. Humon lead prices were RMB 13,380-13,400/mt. There were supplies of Nanfang and Humon lead as producers liquidated inventories ahead of the holiday. Downstream buyers continued to replenish stocks, with trading brisk.
There will be only three trading days in China this week due to China’s National Day holiday. SMM surveyed 30 industry insiders to find that 43% are bearish, seeing LME lead prices fall below USD 1,650/mt, and spot prices in China drop to RMB 13,250-13,400/mt. The slowdown in China, mirrored by the poor PPI, PMI and profit at China’s large industrials, should drag down base metals prices, despite the peak season. Upbeat economic indicators in the US will bolster the US dollar and in turn weigh down base metals. Lead battery producers had built stocks last week, and some traders suspended operation. When combined with liquidity crunch, purchases by battery producers decrease. However, smelters are liquidating stocks, which will push down spot prices.
57% are neutral, citing supports from spot lead prices. Despite negative macroeconomic news, environmental protection inspections at secondary lead plants in Shandong will affect lead supply, lending support to lead prices. Besides, operating rates at lead smelters will improve in October with stockpiling by lead battery producers, undermining any negative effects from macroeconomic front.