Diverted demand, supply recovery grow lead social inventories

SHANGHAI, Jul 19 (SMM) – Overall social inventories of refined lead in China, including primary and secondary materials, continued to rise this week as greater discounts at smelters diverted some downstream demand from the spot market. 

SMM data showed that lead social inventories across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin rose by nearly 1,700 mt from a week ago, to stand at 39,500 mt as of Friday July 19. 

Social stocks also grew on recovery at primary, secondary smelters after maintenance, and shipment resumption in Hunan and Guangdong provinces after torrential rainfall disrupted transportation. 

While spot lead traders held offers at a discount of 50 yuan/mt to flat, against the SHFE front-month August contract, greater discounts at smelters attracted downstream consumers. 

Rising prices of Shanghai lead, which exceeded 16,700 yuan/mt as of Friday July 19, bolstered spot prices and drove primary smelters to expand discounts to 150-50 yuan/mt, over the average prices of SMM #1 lead. Producers of secondary refined lead also raised discounts to 300-200 yuan/mt as of July 19. 

SMM expects social inventories of refined lead to extend their rises next week as improved margins from higher lead prices will spur resumption at small smelters. Higher lead prices will sideline downstream lead-acid battery producers in a slow season, which may also grow social stocks.