Lead social inventories jumped as secondary smelters deepened discounts

SHANGHAI, Jul 3 (SMM) – Social inventories of lead ingots in China rose sharply this week, as buyers turned to secondary lead smelters on wider discounts while demand remained sluggish after some lead-acid battery producers were shut for up to three days for the Dragon Boat Festival.

SMM data showed that lead social stocks across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin increased more than 4,000 mt from last Wednesday June 24 to 33,800 mt as of Friday July 3, much larger than a build of 1,100 mt in the previous week. The stocks have risen for eight consecutive weeks.

Gains in lead prices after the holiday improved profits at secondary lead smelters, encouraging them to deepen their discounts for secondary refined materials to 250-350 yuan/mt against the SMM1# lead price, ex-works, as of Friday.

Lead social inventories in China are likely to continue to trend higher next week as discounts for secondary refined lead show no signs of narrowing, while wider premiums for the SHFE July contract over the August contract and spot discounts prompt some sellers to put their cargoes on warrants for the delivery of the SHFE July contract.