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Chinese lead prices climb in April; poor demand may cap gains

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Chinese lead prices climbed in April but sluggish local demand is expected to cap gains in the coming month, according to market sources.

The benchmark July lead contract on the Shanghai Futures Exchange gained 2.2% over the month to 15,835 yuan per tonne, compared with 15,495 yuan per tonne on March 30.

On the Changjiang Nonferrous market, spot lead was trading at 15,650-15,800 yuan per tonne on April 27, up 150 yuan from 15,500-15,650 yuan per tonne on March 30.

But the increase in prices does not reflect an improvement in demand, sources said.

“The spot prices were actually following the futures market; the real transactions were not active at all,” an analyst at Shanghai Metal Market said. “Smelters and traders maintained their prices because price cuts can’t boost sales at all amid pale demand.”

Lead-battery producers ramped up production after the Chinese New Year holidays and their inventory has been gradually decreasing.

China’s lead-acid battery output totalled 37,139,126 kWh in the first quarter of 2012, up 6.5% year-on-year.

Monthly output in February rose 21.3% from the previous month, while March monthly output increased by 18% month-on-month. These were up by 13.6% and 14.9% year-on-year respectively, according to data from the National Bureau of Statistics (NBS).

Orders for lead-acid batteries are not expected to pick up after March when the slow season starts, Mo Guogang, a Shenzhen-based analyst at China Investment Futures, said.

Local demand may decrease further in the coming months and weigh on prices.

“While lead-acid battery output is increasing steadily, producers’ sales are not good and their booking orders situation is not in good shape either [...] Major battery makers are trying various efforts to control their inventory levels,” Long Lizhi, lead analyst at Jinrui Futures, said.

On the supply side, China’s daily lead output fell by 6.7% year-on-year in March, but rose by 15.7% from the previous two months as the usage ratio recovered after the holiday season.

For the whole month, Chinese smelters produced 34,600 tonnes of lead, down 6.7% year-on-year, but up 12.3% from a combined output of 30,800 tonnes in the first two months of the year, according to NBS.

Refined lead imports fell by 10% month-on-month to 523 tonnes in March, by rose by 1.1% year-on-year. March exports of refined lead were 460 tonnes, up from zero in February, and down 8.1% year-on-year.

For the first three months of the year, China imported a net of 671 tonnes of refined lead.

“It is very likely that battery makers will end up reducing output given the [expected] pale local demand in the coming months. This will certainly impact lead demand and production in turn,” Jinrui’s Long said.

Analysts now expect lead futures to find support between 15,600-16,000 yuan per tonne in May.

editorial@metalbulletinasia.com

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