SHANGHAI, May 10 (SMM) – SMM survey of 30 Chinese lead producers finds that 97% of them see LME lead to fall below USD 1,700/mt this week and SHFE 1607 lead to test support at RMB 12,700/mt.

US non-farm payrolls released last Friday is not so upbeat but wage growth is modest. And US Fed officials said that two rate hike in 2016 is possible. US dollar index thus maintains rising momentum. Technical indicators are negative and LME lead lacks rising strength. Besides, domestic supply is plentiful. TCs remain at highs and average operating rate at lead smelters grew 0.96 percentage point MoM in April, which should post modest rise in May. Inventories in Henan are reported at 50,000 mt and local smelters keep moving goods out at large discounts but still have troubles in pushing trading activities. Also, battery sectors are still in off-season and plan to halt purchase in short term due to cash strain, cutting demand for lead. Distributors report troubles in sales and inventories at battery producers increase. Hence, some battery makers start cutting prices to boost sales.

The rest 3% maker players expect lead prices to move at current levels this week with LME lead struggling around USD 1,750/mt and spot prices around RMB 12,800-13,000/mt. Both technical indicators and fundamentals are negative for lead. But gold and crude oil price gains are upbeat. As such, any large drop in lead prices are unlike. More longs entered Shanghai market on Monday and meanwhile shorts exited market, pushing up lead prices. Some investors believe that lead prices will maintain such rising momentum. But when combined with weak demand, lead prices should head for stability.