SHANGHAI, Feb. 23 (SMM) –37% market players expect LME lead to fall to USD 1,700/mt this week and SHFE 1604 lead will test support at RMB 13,250/mt.
Downstream battery makers keep low operating rates at present as workers have not fully return to work, curbing demand. Besides, most lead producers maintain normal operation during the week-long holiday, piling inventories at those producers above 2,000 mt. And some producers will be eager to sell for cash to repay their loans while downstream buyers show little buying interest, dragging down lead prices. Additionally, distributors are not active in hoarding stocks after holiday, which is in sharp contract with active stock building after the 2015 Chinese New Year holiday. Motive batteries will enter slack season in March, depressing demand.
See SMM Price Forecast, Please Click:SHFE Lead to Remain on Downside Track Next Week
37% investors see LME lead to test resistance at USD 1,790/mt this week and SHFE 1604 lead to challenge RMB 14,000/mt.Tightened secondary lead supply will support lead prices as limited secondary lead producers resume operation with Chinese Lantern Festival just coming to an end. Besides, inventories turn insufficient at some ignition battery makers thanks to stock building by distributors. This will give those battery makers incentive to grow purchase for lead. Also, the brother metal zinc posts large gains and lead prices will also follow up. And longs will likely enter lead market.
Warrants are 11,861 mt currently, according to data from the SHFE, and warrants rocketed by 4,536 mt last Friday from before Chinese New Year holiday. When compared with 14,000 positions for SHFE 1603 lead, spot goods are still insufficient. It is said that longs are active in buying spot goods for March and April at present, fueling likelihood of short squeeze. But some other industrial sources see little possibility for another short squeeze on SHFE lead market after holiday and lead smelters will rush to deliver goods due to continuous rise in SHFE lead prices. All in all, supply tightness in deliverable goods will support lead prices compared with high positions on SHFE lead market.
The rest 26% note that lead prices will move in current level with LME lead between USD 1,720-1,790/mt this week and spot lead between RMB 13,800-14,000/mt. LME base metals grow across the board. But lead prices registered large gains since before holiday and thus further rising strength should be lacking. Moreover, spot lead prices advance to RMB 14,000/mt which is not accepted by downstream buyers. This leads to poor trading. But SHFE lead remains strong and thus spot prices should hover in current range.