July Lead Smelter Silver By-product Output Slightly Declined, Limited Recovery Expected in August [SMM Analysis]

According to an SMM survey, the output of silver by-products from primary lead smelters in July fell nearly 5% MoM from June. The main reduction came from lead smelters in Inner Mongolia and Henan, where silver recovery by-products decreased in tandem with lead production cuts.

Regarding the import of raw silver-lead ore and silver processing trade, lead concentrate with a silver content higher than 2,500g/t can be imported as third-grade silver concentrate. Due to the opening of the lead import window in June and July, the profitability of lead imports partially offset the changes brought by the adjustment of the silver pricing coefficient. In H1 2024, the YoY increase in silver output from lead smelters mainly came from the growth in silver processing trade. The source of this exported silver is primarily from imported silver ore and concentrate products from countries such as Peru, Mexico, Bolivia, Mongolia, and Spain, which are refined into silver in China and then re-exported. This belongs to the category of processing trade for re-export. Currently, China does not offer export tax rebates for silver exports, but deep-processed silver products enjoy export tax rebates.

Additionally, in mid-to-late July, silver prices were relatively weak. Some lead smelters' sales pricing periods were lower than their procurement pricing periods, resulting in a decline in silver refining profits. Although sulfuric acid prices slightly increased in July, the rise was limited, and the overall revenue from silver and sulfuric acid by-products from lead smelting continued to decline. Looking ahead to August, lead smelters will primarily focus on maintenance recovery. Furthermore, with the gradual arrival of imported lead ore and silver-lead ore, lead smelters' raw material inventories have increased to varying degrees. However, due to the continued supply shortage of silver-containing lead concentrate or crude lead and the expectation of weak silver prices, the recovery of silver by-product output from lead smelters in August may not keep pace with the recovery of lead metal production.