On December 27, the Anhui Provincial Department of Ecology and Environment issued a provincial orange alert for heavy pollution weather and initiated a Level II emergency response. The alert covers 15 districts and cities in Anhui Province (except Huangshan). According to the performance grading of key industries with heavy pollution in Anhui Province, most of the secondary lead smelters in Anhui are grade C, and some smelters are grade B. This warning requires grade B companies to reduce production by 50%, and grade C companies need to completely suspend production. According to SMM research, this environmental impact lasted until January 4, 2024. If the warning is upgraded, the impact will be extended.
According to SMM, due to factors such as tight supply of battery scrap, losses, and year-end closures, the secondary lead smelters in Anhui had already reduced and suspended production; therefore, the impact of this environmental control was relatively limited, and SMM expects the supply of secondary refined lead to decrease by approximately 2,800 mt/day.
It is worth mentioning that since entering 2023, given obvious excess production capacity of secondary lead, the amount of battery scrap supply failed to meet the demand of secondary lead companies. The shortage of supply has caused the price of battery scrap to rise all the way, once from 9125 yuan/mt at the beginning of the year to a maximum of 10,050 yuan/mt, setting a new high since August 2018 and the highest in more than five years.
However, later, due to the fall in lead prices and the high cost pressure of smelters, and the quotations of battery scrap dropped. The price of waste electric vehicle batteries fell to a low of 9,525 yuan/mt. Since December 14, the price of battery scrap has stopped falling and rebounded again. However, according to SMM's recent research, due to the tight supply of scrap batteries and widespread losses, the production situation of secondary lead smelters is extremely unstable; and as the price of scrap batteries has rebounded recently, some smelters stopped production.
In Anhui, due to the tight supply of battery scrap, many local smelters reduced and suspended production, and the regional operating rate dropped sharply by 18.9 percentage points in a single week; in addition, some of the sample companies in Henan and Jiangsu also stopped production, and the output of secondary lead declined slightly.
SMM predicts that more primary lead refineries will conduct maintenance in January.
According to recent SMM research, primary lead smelters have been undergoing maintenance recently, including delivery brand companies; in terms of secondary refined lead, smelters in Anhui cut output due to weather pollution. The supply of lead ingots has tightened. In addition, the continued rebound in the price of battery scrap has also brought strong cost support to lead prices.
However, actual transactions in the spot market were limited due to the impact of the year-end closures of account. Weak trading weighed on lead prices before the New Year's Day holidays.
SMM predicts that downstream raw material stockpiling for Chinese New Year holiday will gradually be realized in January. Under the severe cold weather, dealers in the battery sector related to automobile replacement will actively restock inventories. The possible mismatch between supply and demand will support lead prices.
From a long-term perspective, SMM predicts that in 2024, new production capacity at home and abroad will be launched, and the supply of lead ingots will continue to be in surplus. But the tight supply of raw materials may limit the operating rates of smelting capacity. On the whole, SMM predicts that in 2024, the market macroeconomic environment will be complex, and under the expectation of global lead oversupply, the supply conflict of battery scrap and lead concentrate will also intensify. Te cost of lead prices may rise again.
As of December 29, the spot quotation of SMM 1# lead ingot was temporarily stable at 15,550~15,700 yuan/mt, with the average price quoted at 15,625 yuan/mt.
