23% China Lead Smelters See Lead Prices to Grow This Week, SMM Survey

SHANGHAI, Jun. 7 (SMM) – SMM survey of 30 Chinese lead smelters reveals that 23% of them see LME lead to break through USD 1,740/mt this week and SHFE 1607 lead to challenge RMB 13,000/mt.

See SMM Price Forecast, Please Click:LME Lead to Outperform SHFE Lead Next Week, SMM predicts

Some smelters will have to cut production due to raw material supply shortage and some smelters will perform regular maintenance in summer. Average operating rate at domestic lead smelters should slide 3-4 percentage points in June. Reduction in supply will allow smelters to hold offers firm. Lots of disqualified smelters shut down and scrap battery supply still remains tight. Qualified smelters maintain normal operation but mainly for their own use and thus limited goods are released to market. 

US non-farm payrolls for May released last Friday slid to a 6-year low and far missed forecast and this almost kills the expectation for rate hike in June. US dollar index thus posted declines rapidly and this will support base metals. Besides, zinc, gold and silver prices also move higher and this may boost lead prices.

20% industrial insiders expect LME lead to drop below USD 1,680/mt this week and SHFE 1607 lead to test support at RMB 12,600/mt citing downstream poor demand. Leading battery makers lead to extend sales promotion activities but this does not work effectively. There will be only three trading days this week for China’s Dragon Boat Festival. Some battery makers plan no stock-building due to large inventories and plan to start vacation ahead of schedule to ease inventory pressure. Trading will thus remain muted. Also, traders will rush to give price offers but few buyers will enter market. Quiet trading should drag down lead prices.

The rest 57% investors predict that LME lead will fluctuate between USD 1,710-1,740/mt this week, SHFE 1607 lead will struggle around RMB 12,800/mt and spot lead will trade at RMB 12,650-12,850/mt. Trading volumes gradually fall back on LME lead market and SHFE lead mainly fluctuates between the 5 and 20-day moving averages. Lead prices will be sensitive to US dollar index and other metals prices. Demand fails to pick up in domestic lead market while supply pressure will ease slightly. As such, investors will mainly take a wait-and-see stance.