SHANGHAI, Jan 23 (SMM) – Stable primary lead supplies and weaker demand are likely to remain the lead prices on the Shanghai Futures Exchange subdued even as its LME counterpart saw strong performance, SMM expects.
The most liquid SHFE lead contract snapped a six-day winning streak at the start of the week and posted a decline of 0.14% today after a jump in its LME counterparty helped it recover some overnight losses.
SMM learned that primary lead smelters have no plan to suspend production during the Chinese New Year holiday, suggesting that lead supplies would hold relatively stable. Operating rates across primary lead smelters in Henan, Hunan and Yunnan provinces averaged 55.6% in the week through January 18, unchanged from the previous week, SMM data showed.
Thin profit margins, however, prompted some secondary lead smelters to begin their CNY break from last week. Most secondary lead smelters would begin the break during January 26- February 1. This is likely to impact production of secondary lead by some 30,000 mt.
Operation across lead-acid battery producers slowed further. Operating rates across battery producers in Jiangsu, Zhejiang, Jiangxi, Hubei, and Hebei provinces dipped 0.57 percentage point from the previous week and averaged 61.5% last week, showed SMM data.
Some small battery producers have begun their CNY break from January 20 while medium-sized and large plants are likely to begin during January 27-21.
For the same week, social inventories of primary lead across Shanghai and Guangdong declined 7,300 mt to stand at 11,700 mt as of January 18, while overall social inventories grew to 37,000 mt, SMM data showed. Lead social inventories are likely to climb ahead of CNY with steady supply across primary smelters and weaker consumption across lead-acid battery producers, which would weigh on lead prices.
