SMM Minutes: LME Lead Moving Rangebound During Qingming Holiday, Trading in Spot Market were Thin Before Holiday

SHANGHAI, April 6(SMM) -

Futures: On April 1, LME lead opened at $2,407.5/mt and closed at $2,411/mt, up 0.79%. LME lead traded normally during Qingming holiday, moving rangebound above the moving average. The rising of US dollar index also put pressure on non-ferrous metals. LME lead lacked of upward momentum, closing at $2,403.5/mt on April 5, up 0.23%. Shanghai Futures Exchange was closed on April 4 and 5 for the Qingming holiday and opened on April 6.

Spot Fundamentals: In spot market, spot discounts widened in main source of supply and freight rates rose differently. But downstream sourced nearby, leading to the reduction in warehouses of the major consumption areas. At the beginning of last week, the market transactions were very active with inquiries of downstream, then the transactions gradually turned moderate near the weekend. More traders purchased cautiously due to the high prices. The discounts of primary lead smelters expanded to 150-200 yuan/mt with the rise in lead prices last week. Then the discounts of smelters narrowed slightly as the lead prices fell on April 1. The discount in the market was 30-0 yuan/mt against the 2204 contract with narrow premiums in some areas. The trading was relatively active in the middle of this week. Bulk orders were amid scarce transactions after the prices of lead continued to rise. For secondary lead, some smelters were willing to sell goods as the prices of lead rose. The discount gradually expanded to 425-325 yuan/mt. The impact of the pandemic on the production and transport of secondary refined lead has improved slightly, with downstream purchasing on demand or waiting for lead prices to decline. The market remained quiet. In terms of inventory, social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin stood at 99,400 mt, a decrease of 6,700 mt from March 25 and 3,000 mt from March 28 as of April 1.

Lead price forecast: On the macro level, market expectations for the Federal Reserve to raise interest rate increased as the US economic data turned better. While Russia and Ukraine conflicts increased needs of US dollar for hedging, the US dollar index has risen in recent days. After the Federal Reserve announced that raising 50 basis points of interest rate was a choice that must be considered in the evening of April 5, the US dollar index pulled up again, putting pressure on the rising of non-ferrous metals. On the supply side, some of the mines in Inner Mongolia and Tibet were gradually resuming their underground operations, and the arrivals of imported concentrates eased the tight supply of lead concentrates in the market. The pandemic continued to affect the regional supply of lead ingots and cross-provincial transportation. The smelters were active in shipping before the Qingming Festival holiday, with primary lead and secondary lead maintaining a large discount on shipments. Downstream consumption gradually entered the off-season with promotions to destocking. Lead prices may have limited growing space. It is expected that spot lead will decrease by 0-50 yuan/mt from April 1.