Why Lead Price Skyrockets, Ignoring Weak Fundamentals? SMM Reports

Published: Jun 28, 2017 15:20

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Lead price surges mainly due to speculative investment and price growth of ferrous metals and other nonferrous metals, SMM notes.

SHANGHAI, Jun. 28 (SMM) – LME lead market registers firm movement recently. SHFE 1707 lead reached highest level at 17,890 yuan per tonne on June 28, and SMM #1 lead price also surged by 325 yuan per tonne to 17,700-17,800 yuan per tonne.

What is happening in lead market in China?

Refined lead market has turned to oversupply from supply shortage, as downstream battery producers stop raw material purchases and primary and secondary lead smelters resume production after the end of environmental checks.

Lead Price, Can’t Withstand Supply Increase, be Hard to Sustain Firm Growth in July, SMM Forecasts

Downstream battery producers suspend lead purchases this week, following lead price decrease on June 23. For now, offers for spot transaction from primary lead smelters reduce to discounts from premiums of 200-300 yuan per tonne, and secondary refined lead trades at discounts of 50 yuan per tonne from premiums of 200-300 yuan per tonne, both against average SMM #1 lead price. Offers from suppliers also dipped constantly, with those down to premiums of 100 yuan per tonne from 250 yuan per tonne in Shanghai, and down to 300 yuan per tonne from 500 yuan per tonne in Guangdong, against SHFE 1707 lead price.

Watch out for Lead Price Decline in Late June on Demand Decrease, SMM Warns

As such, there is a very small possibility for downstream battery producers, which are facing cash crunch at month and semi-year end, to stock up large amounts of goods in late June to early July after two-week crazy raw material stock-building in early and mid June. Lead ingot inventories at those producers can be used for about one week at present, SMM learns. Finished goods inventory decreases at battery producers, but rises at distributors, as end-user demand remains poor.

To sum up, lead price, running counter to fundamentals, soars mainly due to speculative investment and price growth of ferrous metals and other nonferrous metals. However, lead price is coming to fundamental bedrock in July, SMM expects.

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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.

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