SHANGHAI, Dec. 22 (SMM) – SMM survey of 30 Chinese market players finds that 53% respondents note that LME lead will move between USD 1,650-1,700/mt this week and China’s spot lead will trade at RMB 13,050-13,250/mt.
Tough supply tightens in market, downstream demand starts weakening. Technically, both LME and SHFE lead move between moving averages. Additionally, market will stay cautious this week ahead of US Christmas Holiday.
See SMM Forecast, Please Click: Further Downside Room in Sight for LME Lead Next Week
27% market players are optimistic over lead prices and expect LME lead to rally to USD 1,700/mt this week and SHFE 1602 lead will challenge RMB 13,150/mt.
Primary lead supply tightens in Chinese market. Spot goods in Shanghai reduce after Shandong Humon Smelting performed maintenance and spot goods in market are contributed mainly by traders. In Henan, requirement of production cut turns invalid after the SCO Summit came to an end. But little goods are shipped to market from Henan Yuguang Gold & Lead, Jiyuan Wanyang Smelting Group and Jinli Lead Smelting Factory and those companies mainly sold goods to term buyers. Jiyuan Wanyang Smelting Group moved a small number of goods to market on December 21 with premiums RMB 50/mt above SMM #1 lead average price.
In Hunan, Zhantai Nonferrous Metals recently moved no goods out and Jingui Silver and Yuteng Nonferrous Metals also shipped limited goods out. Thus, local tightened supply narrowed discounts to RMB 100-180/mt from RMB 150-220/mt. In Jiangxi, a large number of goods were moved to market earlier last week but supply turned insufficient on weekend. Jiangxi Copper moved no goods out but Jiangxi Jinde Lead Industry shipped goods out as usual, narrowing spot discounts to zero from discounts of RMB 60/mt against SMM #1 lead average price.
Secondary lead supply also turns insufficient in China. Environmental protection crackdowns hit most disqualified secondary lead smelters in Henan, Hebei and Shandong with secondary lead capacity in the three regions respectively claiming 10.4%, 13.2% and 9.1% of total capacity in China. Also, news of stockpiling in domestic copper market was reported last Friday and should news of output cut and stockpiling of other metals in China continues into this week, lead prices will be supported. Besides, technical indicators also indicate upside trend for lead prices.
20% of industrial insiders are bearish towards lead prices and they see LME lead to fall below USD 1,650/mt this week and SHFE 1602 lead to test support from RMB 12,740/mt. Crude oil prices extend losses currently. US lifted the 40-year ban on crude oil exports, which will grow global crude supply. This will likely depress crude prices. Moreover, many downstream lead-acid battery makers cut purchase for raw materials due to cash shortage late December this year. Also, news of price hikes by leading motive battery makers is gradually digested by market. And distributors almost complete production ramp-up for year’s target, leading to falling orders at some battery makers. This will in turn increase inventories at battery producers.