Lead Futures Declined and Spot Transactions were Poor as US Dollar Increased

SHANGHAI, June 20 - Futures: LME lead opened at $2,106/mt and declined by 3.53% to $2,050/mt last Friday after hitting the highest point at $2,128.5/mt. The open interest decreased by 9 lots to 90809 lots from the previous trading day.

The most traded SHFE 2207 lead contract opened at 15,000 yuan/mt and declined by 0.83% to end at 14,865 yuan/m, after briefly hitting the highest point at 15,050 yuan/mt and rising to the lowest level at to 14,860 yuan/mt. The open interest decreased by 203 lots to 52532 lots from the previous trading day.

Spot fundamentals: Chihong lead in Shanghai market quoted at 15,020-15,040 yuan/mt, in discounts of 50-30 yuan/mt over over the SHFE 2207 lead contract. Henan JINLI GOLD and LEAD Group, Henan JINLI GOLD and LEAD Group, Jiangxi Copper Group and Anhui Tongguan Copper Foil Group in Zhejiang market quoted at 15,030-15,050 yuan/mt, in discounts of 40-20 yuan/mt over SHFE 2207 lead contract. Lead futures rose significantly above 15,000 yuan/mt as the primary and secondary lead smelters reduced the production amid the poor market, pandemic and environmental protection inspections. In this case, cargo holders were active about shipment and the discounts of secondary refined lead expanded to 100-200 yuan/mt. But the downstream mainly purchased as needed in strong wait-and-see sentiment.

In terms of inventory, as of June 17, the social inventory of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin was 93,100 mt, up 5,300 mt from last Friday (June 10) and 4,500 mt from last Monday (June 13) . According the survey, as the stocks were transferred to the social warehouses for the delivery of SHFE 2206 last week, the inventories across regions increased. However, due to the warrants pledge scandal of aluminium, the stocks in Guangdong continued to be transferred. Therefore, only the inventories in Guangzhou declined. In addition, some primary and secondary lead smelters, including primary lead delivery brands, generally reduced the production, hence the supply tightened and the lead ingot inventories may slow down the increase or even decline slightly.

Lead price forecast: In terms of macro, the central banks of many countries announced interest rate hikes last week, and Russia continued to cut natural gas supplies to Europe, which made the market worry about the global economic recession. In addition, the Fed Governor Waller support to raise interest rates by 75 basis points again in July, hence the US dollar index rose by 0.79% amid the risk avoiding sentiment. In terms of fundamentals, the SMM1# lead price rose sharply last Friday. In this case, primary lead and secondary lead smelters were active about shipment and the price discounts expanded, but the actual transaction was modest amid the wait-and-see sentiment as most of the downstream purchased in the middle of last week. It is expected that SMM1# lead price will fall by 100-150 yuan/mt today.