Shanghai lead nears 4-month low on higher China inventories

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SINGAPORE - Shanghai lead prices fell to their lowest in nearly four months on Wednesday, as increasing inventories in top consumer China raised worries about a surplus.

The most active lead contract on the Shanghai Futures Exchange (ShFE) dropped as much as 2.1% to 16,060 yuan ($2,293.27) a tonne, its lowest since July 16. It ended down 1.5% at Asian closing hours.

Benchmark three-month lead on the London Metal Exchange (LME) was also on track for a third straight session of decline, easing 0.2% to $2,146 a tonne as of 0736 GMT.

"Demand (in China) is still very weak and smelters increased output in October, so prices began to decline," said analyst Dina Yu of commodity consultant CRU Group.

"Some secondary lead smelters offered more discounts to promote sales, accelerating the downward movement of ShFE lead prices," Yu said, referring to plants that process recycled lead.

Lead output from recycled materials in China has increased as they are less affected by environmental-protection measures in the country, a source at a Chinese lead smelter said.

FUNDAMENTALS

LEAD STOCKS: Lead inventories in warehouses tracked by ShFE rose to their highest since the week ended Sept. 12 at 21,411 tonnes; however, on-warrant LME stocks fell to a three-month low at 64,025 tonnes.

LEAD BALANCE: The global refined lead market is seen switching into a surplus of 55,000 tonnes next year, after staying in shortage throughout 2017-2019, the International Lead and Zinc Study Group said last month.

SPREAD: The difference between LME cash lead and the three-month contract has stayed in the premium zone since mid-October, indicating tight nearby supplies outside of China.

COPPER: Low copper inventories in LME-approved warehouses, supply disruptions in top copper producer Chile as well as hopes on trade talks have supported copper prices.

COPPER PRICES: LME copper edged down 0.2% to $5,929.50 a tonne after hitting its highest in more than seven weeks in the previous session, while Shanghai copper closed up 0.1% to 47,190 yuan a tonne.

OTHER PRICES: LME nickel fell 0.3% to $16,240 a tonne and zinc declined 0.4% to $2,487.50 a tonne. ShFE nickel dropped 1.2% to 130,320 yuan a tonne and zinc fell 1.4% to 18,740 yuan a tonne.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin