The dollar strengthened overnight on the back of several positive macroeconomic data releases from the US (see data section below), with the dollar index reaching a high of 95.15 on Monday. The index was up by 0.09% at 94.93 as at 10.13am Shanghai time, which compares with a low of 94.17 on June 26.
Lead was the outperformer of the SHFE complex so far in the early session, with its most-traded August contract rising to 20,150 yuan ($3,028) per tonne as at 10.12am Shanghai time, up by 70 yuan per tonne or 0.4% from Monday’s close.
Lead prices have found support amid supply disruptions at primary and secondary lead refineries in China due to extensive environmental inspections across the country.
The Chinese central governmental sent inspection teams to carry out one-month environmental inspections in the provinces of Henan and Hebei on June 1. Both provinces are key production hubs for lead.
“Though the environmental inspections in Henan and Hebei provinces have finished, the overall spot lead supply is still tight as it takes time for secondary lead refineries to resume normal operations. In addition, lead refineries in southern China are still carrying out regular maintenance…,” Citic Futures Research said.
“Lead prices therefore are underpinned by supply tightness and the low availability of warrants caused by the strict environmental inspections,” Citic added.
Similarly, sister-metal zinc has also found support from raw material supply constraints caused by the environmental crackdown, though the firmer dollar overnight has done much to limit these gains.
The most-traded August zinc contract price on the SHFE edged up to 23,065 yuan per tonne as at 10.12am Shanghai time, up just 5 yuan per tonne from Monday’s close.
“The domestic environmental crackdown [in China] has led to difficulties in adding new zinc concentrates supply. In addition, the declining of ore grade heads at zinc mines has also resulted in tight supply of raw materials,” Citic Research noted.
Furthermore, major Chinese zinc smelters’ determination to cut production has also triggered market concerns over supply of refined zine in near future.
Last week, China’s fourth largest zinc smelter, Shaanxi Dongling told Metal Bulletin it would cut refined zinc output indefinitely to 9,000 tonnes per month in May from 24,000 tpm previously, and other zinc smelters in China are likely to follow suit to fight against low concentrate treatment charges (TCs). Base metals prices
Currency moves and data releases