Lead social inventories inch up despite production cuts

SHANGHAI, Jun 28 (SMM) – Overall social inventories of refined lead in China, including primary and secondary materials, continued to grow this week as continued weakness in the lead-acid battery market kept demand for lead weak.

SMM data showed that lead social inventories across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin rose by some 100 mt in the week to Friday June 28, to stand at 34,400 mt.

Poor demand drove some lead-acid battery producers deepened their production cuts this week.

Top lead maker Henan Yuguang Gold & Lead, whose products are deliverable for futures contracts, earlier this week shut down one production line at a lead smelter in Jiyuan for maintenance.

This drove traders to offer in a premium of up to 50 yuan/mt over the July lead contract on the Shanghai Futures Exchange. A handful traders even hiked the premium to a maximum of 70 yuan/mt after SHFE lead weakened later in the week.

Meanwhile, pessimistic secondary lead smelters widened their discounts against the average of SMM 1# lead this week, to 200-150 yuan/mt as of Friday. This diverted lead buyers, and helped grow social inventories.

Lead social inventories are expected to hold stable next week, in view of new maintenance or recovery at smelters and weak consumption.