SHANGHAI, Aug. 15 (SMM) – A recent SMM survey of 40 major domestic lead smelters (total capacity 3.64 million mt) revealed the following insights:
1) Primary Lead Smelters Operating Rates 59.24% in July
Refined lead output in July was 179.4 kt and the average operating rate at the surveyed smelters was 59.24%, down 1.14% from June.
The survey covered 40 major domestic primary lead smelters with a total capacity of 3.64 million mt/yr. Operating rates at large-scale primary lead smelters rose MoM in July, while operating rates at medium and small size smelters both fell MoM.
Refined lead output at the large smelters (capacity above 100 kt/yr) was 70.3 kt, up 4,800 mt from June, and the average operating rate was 70.89%, up slightly on MoM basis and mainly a result of higher output at Yuguang Gold and Lead and Shuikoushan Nonferrous Company. Output from Yuguang Gold and Lead grew MoM due to higher lead prices and despite environmental protection inspections conducted in Henan province in early July. Output at Shuikoushan Nonferrous fell in June due to maintenance held from late May to late June, but the company reported normal production in July.
Refined lead output at medium smelters (capacity 50-100 kt/yr) was 99.5 kt, with an average operating rate of 53.54%, down 3.82% MoM. Output at Xinling Lead Industry, as well as at Zhicheng Gold and Lead Company, was down sharply in July, while Tongguan Nonferrous Metals and Yuteng Nonferrous Metals Company also reported lower output due to maintenance. As a result, total output and operating rates at medium-size smelters were both down in July.
Refined lead output at the eight small smelters (capacity below 50 kt/yr) was 9.9 kt in July and with operating rates down 6% MoM.
2) Mixed Outlook Towards Lead Price Trends
Following nationwide environmental protection inspections at 1,930 enterprises, over 80% enterprises were closed, with only 229 lead-acid battery producers still reporting normal production. With regard to lead price trends, smelters expressed mixed views given current production suspensions at lead-acid battery producers.
Most enterprises believe in the end, lead consumption will be lower than expected. However, domestic battery shortages and rising battery prices will prompt enterprises to restart or increase production as early as possible. In this scenario, refined lead demand may be stronger than expected despite the closure of many enterprises.
In addition, lead consumption at some smelters is expected to be down significantly due to the closure of many lead-consuming enterprises.
In total, these latest environmental protection inspections have had a significant impact on domestic lead consumption, but should begin to return to normal once existing lead inventories are consumed and since demand from smaller enterprises which closed will be absorbed by increased output at large scale enterprises.