SHFE lead to strengthen this week on post-holiday restocking, production curbs

SHANGHAI, Oct 8 (SMM) – Shanghai lead futures are likely to strengthen this week as downstream consumers restock raw materials after the week-long National Day break and as some smelting capacities in Hunan come under pressure from environmental probes, SMM expects.

The contract for November delivery, the most traded one, climbed on the first trading day after the break. It gained 0.9% in the daytime trading sessions and settled at 18,130 yuan/mt.

SMM learned that environmental inspectors from the central government have settled in the Hunan area and this accounted for production cuts at some local primary lead smelters.

Ore supplies are tight, with zero gains in treatment charges for lead concentrate in October. As winter approaches, smelters would begin to stockpile raw materials and this is set to exacerbate the supply gap.

Low stocks would also provide some support to prices. SMM data showed that social stocks of primary lead across Shanghai and Guangdong decreased 2,800 mt over the week ended September 28 to stand at 7,900 mt. For the same week, stocks of SHFE warrants shrank 2,913 mt to 8,721 mt.