SMM Summit 2016: What Are Driving Factors behind Surging Lead and Zinc Price? SMM Interviews 

SHANGHAI, Nov. 21 (SMM) – What are driving factors behind soaring lead and zinc prices in 2016? Will ore supply stories continue affecting prices in 2017? Where will zinc and lead prices go in 2017? The followings are opinions of large lead & zinc enterprises shared at one Lead&Zinc interview at SMM 2016 China Metals Summit (CMS) in Shanghai from Nov. 10-11.

SMM: Lead and zinc ore is a hot topic in 2016. Global lead and zinc ore supply deficit has widened and China’s imports of lead and zinc ore are down sharply, resulting in falling TCs. Will this condition continue into next year and how long will it keep?

Collections of Stories in Base Metal Market at SMM 2016 Annual Summit

Huang Huang, Chinese Representative of International Zinc Association (IZA): Zinc concentrate supply is in severe shortage in 2016 while zinc demand is higher than expected. Zinc is the most actively traded one in major nonferrous metals. The closures of foreign zinc mines cut ore supply by 880,000-890,000 tonnes in total, and meanwhile production cuts by some mines were above 450,000 tonnes. The outlook for zinc market is optimistic, as zinc mines will not resume operation in a short term. Renewable resources will be also a source of raw material.

Zhang Wanbao, General Manager of Inner Mongolia Xingan Copper & Zinc Smelting Company: China’s imports of zinc ore increased 800,000 tonnes in 2015 and supply deficit is about 800,000 tonnes in 2016. Zinc ore demand and supply is expected to reach balance at the end of year. Prices are expected to keep rising in Q1 2017 due to tight zinc ore and brisk demand.

SMM: It is heard that Jiyuan Wanyang Smelting Group has commissioned one secondary lead production line. Mr. Lu, would you please tell us something about development of secondary lead as a primary lead smelter?

Lu Qiang, Vice General Manager of Jiyuan Wanyang Smelting Group: Supply of high-grade lead ore is decreasing, and lower grade will negatively affect lead output. That’s why we need secondary lead. So, secondary lead has a big potential growth.

Yang Dawei, Vice President of Jiangsu New Chunxing Resource Recycling: Lead prices are predicted to keep rising. Secondary lead sector has entered a rapid development period since 2002 and accounted for 40% of total lead consumption as of 2016. Some primary lead smelters have also started to produce secondary lead. It is benefited to secondary sector if strong and responsible enterprises join in. The outlook for secondary lead sector is positive in the future. Global average consumption of secondary lead is at 56%, and US and Europe accounting for 80%. So, there still a big room for us to improve. Some large lead smelters have taken measures to upgrade secondary lead products, dispelling concerns over quality issues, and this will help promote secondary lead consumption.

SMM: How will the sector be affected by producer responsibility system?

Shen Weixin, President of Jiangsu Haibao Battery: Ignition battery accounts for 60% of lead consumption. The number of car ownership is 250 million in China. Battery is second-hand energy, which can only be used for 1-1.5 years. About 50% of used battery inventories enter into recycling, including batteries of automobile, motorcycle and UBS. We have sources to supply lead to market, which will form a circulation.

Rising lead prices is not a true reflection of consumption. Ignition battery market has already entered the off-season, but lead prices have kept rising and battery prices have also increased each month. Many battery producers are suffering from losses due to quiet demand in China’s market. Increasing zinc supports lead prices. Rising real estate attracts capitals into the zinc market, which also helps lead prices rise. So, the present high lead price is a bubble in some extent. Battery producers will not build stocks because battery price do not increase as big as lead price, and will operate based on orders. Lead prices are predicted to drop once the bubble bursts.

SMM: Zinc prices are up 70% in a year, and will this affect downstream buyers significantly? In recent years, output in alloy sector tends to shift to large producers, and what’s your opinion on this?

Song Shaowen, General Manager of Guangdong Jinyi Alloy Products: The surge of lead price will not affect demand. Consumption will increase as rising prices. We will pay more attention to product quality as prices are up. Higher quality will only attract more demand.

Huang Huang, Chinese Reprehensive of IZA: I am positive toward zinc prices in 2017, but zinc smelters may suffer losses. Falling TCs will cut profits at smelters. Low TCs were last seen in late 2011, and continued to mid 2012, dropping from the highest level of 6,400 yuan per tonne in early 2011 to the lowest level of 4,300 yuan per tonne in late 2011. TCs approaches to the low level in 2016, but zinc ingot is at highs, so most smelters will still have profits, despite a slim one. Zinc ore is tightening at the end of year, pushing zinc prices up. TCs are expected to move at lows or drop further from Q4 2016 to Q1 2017.

Zhang Wanbao, General Manager of Inner Mongolia Xingan Copper & Zinc Smelting Company: Zinc is divergent to lead. Zinc prices were not affected by demand. Because market accepts high prices due to brisk demand. However, high battery prices, downstream of lead sector, were not that acceptable. So, I was bullish toward zinc prices in 2017.

Luqiang, Vice General Manager of Jiyuan Wanyang Smelting Group: Low-end lead prices are increasing after this round of rise, and I expect lead prices to trade at 15,000-16,500 yuan per tonne in 2017.

Yang Dawei, Vice President of Jiangsu New Chunxing Resource Recycling: I expect lead price to increase next year. Lead price will be at highs in Q1 2017 and will drop slightly in Q2 and Q3. Lead prices are expected to be at 13,500-18,000 yuan per tonne in 2017.