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Why Lead price shot up despite weak fundamentals?

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SHANGHAI (Scrap Register): Lead prices at London Metal Exchnage have registered firm movement recently. SHFE 1707 lead reached highest level at 17,890 yuan per ton on June 28, and SMM #1 lead price also surged by 325 yuan per ton to 17,700-17,800 yuan per ton.

Refined lead market has turned to oversupply from supply shortage, as downstream battery producers stop raw material purchases and primary and secondary lead smelters resume production after the end of environmental checks.

Downstream battery producers suspend lead purchases this week, following lead price decrease on June 23. For now, offers for spot transaction from primary lead smelters reduce to discounts from premiums of 200-300 yuan per ton, and secondary refined lead trades at discounts of 50 yuan per ton from premiums of 200-300 yuan per ton, both against average SMM #1 lead price.

Offers from suppliers also dipped constantly, with those down to premiums of 100 yuan per ton from 250 yuan per ton in Shanghai, and down to 300 yuan per ton from 500 yuan per ton in Guangdong, against SHFE 1707 lead price.

As such, there is a very small possibility for downstream battery producers, which are facing cash crunch at month and semi-year end, to stock up large amounts of goods in late June to early July after two-week crazy raw material stock-building in early and mid June.

Lead ingot inventories at those producers can be used for about one week at present, SMM learns. Finished goods inventory decreases at battery producers, but rises at distributors, as end-user demand remains poor.

To sum up, lead price, running counter to fundamentals soars mainly due to speculative investment and price growth of ferrous metals and other nonferrous metals. However, lead price is coming to fundamental bedrock in July, SMM expects.

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