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Operating Rate at Secondary Lead Smelters Unchanged from September

iconNov 20, 2012 09:57
Source:SMM
Operating rates at the 12 SMM surveyed secondary lead smelters averaged 65.59% during October, virtually flat at September’s 65.13%.

SHANGHAI, Nov. 20 (SMM) – Operating rates at the 12 SMM surveyed secondary lead smelters averaged 65.59% during October, virtually flat at September’s 65.13%.

The average operating rate at large smelters with capacities above 150,000 mt/yr grew to 91.73% during October, up 4 percentage points from September’s 87.71%, as a sharp increase in output at Anhui Huaxin Lead offset production cuts caused by maintenance in early October at Henan Yuguang Gold & Lead.

Operating rates at SMEs were lower, with the average rate down 1.28 percentage points  MoM to 42.52% at medium smelters, and down by 11.46 percentage points to 51.81% at smaller smelters. The lower output was due to the following reasons.

First, although scrap battery prices fell during October, some secondary lead smelters reported that recyclers were unwilling to sell goods after smelters cut price offers. As a result, smelters were forced to pay higher prices for scrap batteries in order to maintain normal production. Since scrap battery prices account for over 80% of the costs of secondary lead production, the higher scrap battery prices cut profits for smelters.

Second, #1 lead prices fell by 4% during October as LME lead prices fell, with some #1 lead  quoted as low as RMB 14,850/mt. Meanwhile, prices for secondary lead (Pb ≥ 99.97) were RMB 14,850-15,000/mt, down only 2% as scrap battery prices were more resistant to declines. As a result, many downstream enterprises purchased #1 lead, which is also of higher quality than secondary lead, curtailing demand for secondary lead.

Finally, purchases by lead-acid battery producers were down due to weak downstream battery demand. According to SMM sources, orders at lead-acid battery producers were down during October, especially for motive battery producers which reported output down by as much as 50%. Despite the lower operating rates, finished goods inventories at battery producers remained high, forcing producers to cut prices to boost sales, with prices at some producers below production costs. Lower operating rates at lead-acid battery producers further weakened secondary lead demand.

 

operating rate at secondary lead smelter
secondary lead output

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