SMM Lead Market Daily Review (2015-11-2)

SHANGHAI, Nov. 3 (SMM) – SHFE 1512 lead moved lower to RMB 13,045/mt on Monday and ended the day at RMB 13,055/mt, down RMB 215/mt or 1.62%. Trading volumes declined 160 to 6,690 lots and positions were down 1,434 to 12,084.

Jinsha brand quoted at RMB 13,270-13,300/mt in Shanghai, RMB 120-150/mt above SHFE 1512 lead. Mainstream trade prices were RMB 13,250-13,260/mt for Chengyuan and Nanfang brands, versus RMB 13,240/mt for Mengzi brand and RMB 13,230-13,250/mt for Humon brand.

Hechi Nanfang Nonferrous Metals Group and Shandong Humon Smelting moved goods to market. Chengyuan brand also flowed into market, growing spot supply. Downstream buyers still purchased as needed in the off-season despite of early November. Trading activities remained sluggish.

SMM survey of 30 market players shows that 55% of them are bearish towards lead price and they expect LME lead to fall to USD 1,670/mt this week and SHFE 1512 lead to test support at RMB 13,000/mt. Motive battery sector enters an off-season, cutting demand for lead. Leading battery makers cut operation and growing mid-sized and small producers halt or cut operation. Pessimistic smelters in Henan rush to sell when prices stay reasonable and Jiyuan Wanyang Smelting Group gradually moves goods out, increasing local supply. In Shanghai, Jincheng Chengyuan Smelting shipped 300 mt of lead to market on Monday. Jiangxi Copper recovers from maintenance and Huludao Zinc Industry contributes 2,000 mt to market supply per month. Growing supply will curb lead prices.

Lots of disqualified secondary lead smelters shut down due to environmental protection crackdowns and thinner profits. This leads to a growth in scrap battery supply and consequently, falling scrap battery prices will not support lead prices. Moreover, technical indicators also point downside.

44% market players see LME lead to stabilize at USD 1,700/mt this week and spot lead to keep at RMB 13,200-13,350/mt. On macro side, US Michigan consumer sentiment index in October missed forecast and markets expect US October’s ISM manufacturing index to be downbeat, depressing dollar slightly. China’s Caixin manufacturing PMI for October comes in at 48.3, above September’s 47.2 and expected 47.6, benefiting from previous stimulus measures. Besides, though motive batteries enter an off-season, consumption in ignition battery market picks up with temperatures turning cold. Leading battery makers suspend sales promotion, indirectly increasing battery prices, which however, will not act as strong rising momentum for lead prices.

Only 3% respondents are optimistic over lead prices and they see LME lead to grow to USD 1,720/mt this week and SHFE 1512 lead to stabilize at RMB 13,250/mt. At present, a large number of irregular secondary lead smelters halt operation, tightening spot supply. Meanwhile, secondary lead smelters hold bullish attitude towards lead prices.