SHFE Lead Prices down 6.93% on Negative Fundamentals, SMM Learns

Published: Apr 07, 2017 18:57 (GMT+8)

Save

SHFE 1705 lead dipped below 17,000 yuan per tonne and approached to 16,000 yuan per tonne, down 6.93%, underperforming base metals.

SHANGHAI, Apr. 7 (SMM) – SHFE 1705 lead dived sharply during afternoon trading on Friday. The contract dipped below 17,000 yuan per tonne and approached to 16,000 yuan per tonne, down 6.93%, underperforming base metals.

SMM learned from lead smelters and battery producers that negative fundamental was the main factor behind the plunge. During the afternoon trading, shorts strengthened while longs closed positions, sending SHFE 1705 lead down. But market players were divergent on price outlook after the contract dipped to 16,000 yuan per tonne and SMM detailed factors behind lead price movement as follows.

Breaking News: What Triggers Wide-Spread Declines in China Base Metals Market on Friday? SMM Reports

First, many domestic primary lead smelters will have maintenance or cut output in April. According to SMM’s latest survey, output at China’s primary lead smelters will be slashed 12% in April on a monthly basis. (See details in the next Lead Weekly Report) Second, SMM survey learns that some downstream battery producers plan to buy goods with price at around 16,000 yuan per tonne. Discounts of lead will reverse to premiums with improving trading, which will support SHFE 1705 lead to rise. Third, as the SMM/LME lead price ratio has declined to 7.25, lead eaport window is likely to open. LME canceled warrants are high at present and inventory drops continually, a sign of tight supply in overseas market. Domestic lead smelters are expected to export lead in the near term, easing oversupply in China’s market. Fourth, social inventory is at low. Fifth, environmental protection inspections will keep affecting production at lead smelters.

However, SHFE 1705 lead will face downward pressure for the foreseeable future with negative technical indicators. Moreover, inventories at battery producers stay high in April due to off-season, leading to low operating rate.

To sum up, SMM attributes negative fundamentals to the sharp decline in SHFE 1705 lead price. In mid to late April, lead oversupply will ease in China’s market and supply and demand will be both sluggish. Besides, no more negative factors will be issued in a short term. SMM foresees that SHFE 1705 lead will not keep diving and find support at 16,000 yuan per tonne.

For news cooperation, please contact us by email: sallyzhang@smm.cn orservice.en@smm.cn.

SHFE lead LME lead lead prices

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

For any inquiries or for more information, please contact: lemonzhao@smm.cn

For more information on how to access our research reports, please contact:service.en@smm.cn

Related News

12 hours ago

【Flash | Lumentum Commits $87 Million to Secure AXT’s InP Wafer Capacity Through 2031】

AXT and Lumentum signed a binding capacity reservation agreement for Indium Phosphide (InP) wafer substrates through December 31, 2031. AXT will reserve minimum annual product capacity and support additional capacity, while Lumentum will provide two $43.5 million deposits, totaling $87 million, to be applied as shipment credits. Lumentum is liable for annual purchase shortfalls, subject to specified exceptions, while AXT’s failure to deliver minimum capacity constitutes a material breach. SMM views the six-year commitment as a firm demand signal for InP substrates and high-purity indium. Wafer volumes, diameter mix and corresponding indium consumption were not disclosed.

12 hours ago

16 hours ago

【Flash | Semtech Adds Cleanroom Space as InP Photonics Demand Ramps】

Semtech said in its Aug. 25 earnings presentation that its data-center photonics portfolio spans gain chips, high-power CW lasers, SOAs and high-speed photodiodes, while it has secured FY2027 equipment deliveries and acquired additional cleanroom space. Semtech acquired HieFo in March, adding US-based InP gain-chip and DFB-laser manufacturing. Q2 FY2027 data-center sales reached $100 million, up 39% QoQ and 91% YoY; Q3 sales are targeted to rise 45% QoQ and 160% YoY. SMM believes the buildout supports medium-term demand for InP and high-purity indium, although no nameplate capacity or indium consumption was disclosed.

16 hours ago

【SMM Flash News】Bunker Hill Adds Metal Recovery Criteria to Its Year-End Commercial Production Target

Bunker Hill said on October 5 that its Idaho zinc-lead-silver mine remained on track to achieve commercial production by year-end 2026. The revised criteria require throughput of at least 65% of the plant’s 1,800-tonne-per-day nameplate capacity, alongside zinc, lead and silver recoveries of at least 70%, for 60 consecutive days. A 10-hole, 975-metre surface drilling programme has also started at Page.

16 hours ago