China Lead Prices to Face Pains from Mounting Stocks, SMM Says

SHANGHAI, Jun. 20 (SMM) – The lead prices in China may take a hit in the near future due to pile-up in stocks, Shanghai Metals Market expects.

Lead stocks in Shanghai and Guangdong grew by over 10,000 tonnes to 80,000 tonnes since the end of May. And lead smelters also reported big rise in inventories, approaching the level posted early May.

Average operating rate at domestic major primary lead smelters was 70.63% in May, the highest since 2010. The rate should slide 3-4 percentage points in June, but still 10 percentage points higher than the same period last year.

On the consumption side, average operating rate at 51 domestic battery makers was 58.03% in May, falling 4.49 percentage points MoM. The rate is expected to drop to 55% in June, far below the same period last year.

Goods delivered by lead smelters are limited in mid-June due to modest spot discounts. But smelters will likely rush to deliver goods to SHFE warehouses in July under heavy stock pressure. Tight cash at the end of June will worsen the supply and demand imbalance. This may push lead prices to test support at 12,500 yuan per tonne and weakness in lead market should continue till the delivery of SHFE 1607 lead. 

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