Higher supply of lead concentrate to boost primary lead capacity in 2021

SUZHOU, Dec 4 (SMM)—Supply of lead concentrate is likely to increase amid an rise in mines in 2021, says SMM’s senior lead analyst Wenming Xia.

“Changes of raw material structure are likely to lower the concentrate dependence at refined lead producers. TCs are expected to rise amid higher supply and demand, higher refined lead output or production resumptions.”

Xia was speaking on the 2021 outlook on the China domestic lead markets to local and international delegates today at the Shanghai Metals Market's 2020 Nonferrous Metals Industry Chain Annual Conference held in Kempinski Hotel at Suzhou, China.

Forecast of consumption recovery post COVID-19

E-bike sales totalled more than 30 million units/year, with community ownership of 300 million units, according to CBA. The output of e-bikes over 1,000 yuan/units also continued to rise. After the implementation of the new national standard for e-bikes, the industry has shifted from rapid development to high-quality development. E-bike output is likely to rise to 39 million units in 2021.

Automobile consumption was boosted with improved restriction policy and higher registration certificates. In order to attract residents at the countryside to make new car purchases, the government will also encourage trade-ins, and encourage rural residents to purchase trucks of 3.5 mt or less and passenger cars with displacements of 1.6 litres or less. Subsidies will also be provided to residents to phase out cars with national emission standards 3 or less.

Domestic lead continued to be oversupply in 2019-2021, but the recovery of consumption could be expected. LME lead is likely to move between $1,630-2,220/mt. SHFE lead is likely to move between 13,500-17,000 yuan/mt. Spot lead is likely to move between 13,500-16,850 yuan/mt.

On a long-term perspective, lead supply will continue to rise due to higher capacity,

according to Yettie Yi, Business Director of SMM Consulting.

Total capacity of primary lead and secondary lead stood at 11.09 million mt in 2020, up 17% on the year, and likely to reach 11.98 million mt in 2021. The capacity of secondary lead exceeded primary lead from 2020 and accounted for 53% of total capacity, likely to increase 830,000 mt in 2021, Yi estimates.

“Lead ingot consumption is expected to be boosted by high frequency of start-up battery replacement in automobiles during 2021-2023. But the growth will be dampened by lower battery consumption. The transition period of the new national standard for e-bikes will end in 2021 in most regions, which is expected to promote the replacement of e-bikes and stimulate the demand for lead ingots.” Yi added.