Lead was the outperformer of the SHFE base metals, with its October contract trading at 17,880 yuan ($) tonne as at 10.19am Shanghai time, up by 345 yuan per tonne or 2% from its closing price on Wednesday.
The heavy metal has found support from low inventory levels; SHFE lead stocks totaled 18,697 tonnes on August 17, down 57.6% from 44,113 tonnes in a year earlier.
“Lead prices have found much support from the low level of inventories right now. We think inventories are sure to continue declining. Firstly, a new round of environmental inspections, which began on August 20, has forced many secondary lead smelters to shut down their factories,” a Shanghai-based analyst said.
“Moreover, some lead smelters have voluntarily closed their refineries due to squeezed margins. Right now, the price difference between cost of purchasing recycled battery and the sale price of lead ingot is around 6,600 yuan per tonne, which means refineries are losing money rather than gaining for each tonne sold,” the analyst added.
Sister-metal zinc also made significant gains over the morning session, supported by a ninth consecutive decline in SHFE stock levels, which at 34,930 tonnes on August 17 are now at their lowest since November 2007. Zinc’s most-traded October contract climbed to 20,655 yuan per tonne, up by 1.5% or 300 yuan per tonne from Wednesday’s close.
“So far in 2018, zinc stocks in SHFE-approved sheds have declined 49%, which suggests that the domestic Chinese zinc market has tightened,” Metal Bulletin analyst Andy Farida said.
“Stricter environmental inspections and shutdowns of small-to-medium size zinc mines, which are operating illegally, are taking their toll on domestic supply,” Farida added.
Base metals prices
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