Most Lead Smelters in China Pessimistic over Lead Prices This Week, SMM Survey

SHANGHAI, May 17 (SMM) – SMM survey of 30 Chinese lead producers indicates that 77% of them are bearish over lead prices this week and they expect LME lead to drop to USD 1,680/mt and SHFE 1607 lead to test support at RMB 12,700/mt.

See SMM forecast, please click:LME Lead to See Weak Trading Next Week, SMM expects

Ferrous metals prices extend losses and the most-actively traded iron ore contract registered 13.05% declines last week. This will fuel bearishness in nonferrous metal market. The poor reading of China’s April economic figures boosts wary sentiment in market while recent figures from US are positive, including April retails sales and University of Michigan’s CCI. And markets expect US CPI and housing starts due for release this week to be upbeat. This will support US dollar, imposing pressure on base metals prices.

Lead supply remains sufficient in domestic market. Inventory pressure eases slightly in Henan after delivery of goods to SHFE warehouses and local spot discounts narrow marginally. But the nearly 60,000 mt inventories at smelters in Henan remain as pressure on lead prices. Besides, the rigid demand stays weak, also growing supply pressure. Discounts offered by Hunan-based smelters already expanded from RMB 80-200/mt to RMB 100-300/mt recently but sales do not pick up. A growing number of large battery producers cut operation with limited orders in slack season. And some battery makers only purchase a small amount of lead under term contracts due to cash strain

The rest 23% market players see lead prices to fluctuate at current levels this week and they predict that LME lead will struggle around USD 1,720/mt and spot lead will trade at RMB 12,750-12,900/mt. Primary lead supply is plentiful but secondary lead and scrap battery supply tighten in market. Firm scrap battery prices will support lead prices but any support from scrap batteries is limited. Parts of producers point out that longs may enter market should SHFE lead slip rapidly despite weak fundamentals, which will slow declines in lead prices.