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[SMM Analysis] supply-side expectation differences push prices upward lead fundamentals upside down?
Jun 25,2019 14:32CST
translation
Source:SMM
It is not difficult to find that if the fundamentals of July are in line with our expectations, the probability of an increase in social inventories in July will be greater, putting some pressure on the lead price, in addition to the frequent occurrence of macro events, the future market needs to be cautious macro and fundamental double pessimistic expectations resonance, lead prices return to the bottom of the 10,000 platform.
The content below was translated by Tencent automatically for reference.

News from SMM6 on the 25th of June

Since May, the trend of lead prices has basically continued the shock of the box body, and it is optimistic that the smooth degree of price decline has been hindered to a certain extent, in which the maintenance of electrolytic lead refineries and the cost support of regenerated lead have contributed to the recovery of the early decline in lead prices in the past two days, and once again to probe into the pressure on the top of the box. The factors driving this price rise are nothing more than the maintenance of large refineries in Henan and the environmental production limit of 30% in Henan (crude lead link). How long will the rise, spurred by sudden cuts on the supply side, warm pessimistic expectations of a big increase in electricity and lead supply in July?

 

Because the marginal change of social inventory of lead has a certain static correlation with the operation of lead price, judging the change of supply and demand balance of lead in the future can help us to judge the expected operation direction of lead price.

Supply side: as shown in the chart, the original lead refinery, which began maintenance in June, resumed production in July, with an estimated recovery of 25, 000 to 30, 000 tons, according to SMM research. In addition, in July, Henan Yuguang, Henan Minshan began maintenance, the impact is expected to affect about 18,000 tons, but because the Henan environmental protection production limit of 30% is the crude lead production link of the refinery, the electrolytic production line is not affected, we expect the influence of electrolytic lead is limited. Taken together, it is estimated that the supply of electrolytic lead is expected to increase by about 0.5000 to 10,000 tons in July compared with June. In terms of recycled lead, a licensed regenerated lead refinery in Anhui will resume production as scheduled on July 2, and after the resumption of production, the output of regenerated lead in the second phase of the production line will be increased to 1200 tons / day, which is expected to take about 10 days (about 600t / day before the second phase of maintenance). We estimate that only the enterprise will resume production or bring about an increase of nearly 10,000 tons of recycled lead. Judging from the overall performance of the lead supplier in July, the increment of refined lead is about 25, 000 to 30, 000 tons.

On the consumer side, from the actual research of SMM, at present, the finished product inventory of some storage enterprises is high. At the same time, due to the low terminal consumption, the finished product inventory of dealers is also at a high level in recent months. The transfer of the whole finished product inventory of storage enterprises is not very smooth. This also leads to the storage enterprises to take the initiative to reduce the factory opening rate in order to go to the warehouse. From another dimension, under the premise of a substantial month-on-month decline in the supply of electrolytic lead in June, However, the transaction price of electrolytic lead in the market is generally in the SMM1# lead paste water, the primary price gap of regeneration has expanded from flat water to 150yuan / ton, all kinds of signs prove that the lead consumption in June is extremely weak, into July, we have not seen the possible factors that may boost lead consumption, so we are optimistic to judge that the lead consumption in July continues for June.

Taken together, it is not difficult to find that if the fundamentals of July are in line with our expectations, the probability of an increase in social inventory in July will be greater, putting pressure on the lead price to a certain extent, in addition to the frequent occurrence of macro events, the future market needs to be cautious, macro and fundamental double pessimistic expectations resonance, lead prices return to the bottom of the 10,000 platform.

 

 

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