SHANGHAI, May 20 (SMM) – SMM’s survey of 12 major secondary lead smelters reveals the average operating rate at the surveyed smelters during April was only 45.44%, down from 52.97% in March.  

 

The average operating rate at large smelters with capacities above 150,000 mt/yr fell by 5.11percentage points to 53.76%, due mainly to the maintenance at Yuguang Gold & Lead. The average rate at medium and smaller smelters was 37.18% and 47.69%, respectively, down 9.66 percentage points and 8.83 percentage points MoM. Lower operating rates at SMEs were mainly the result of depressed downstream demand and difficulty in sourcing scrap batteries. Anyang Jinpeng Lead, Jiangsu New Chunxing Resource Recycling, Guangdong Xinyu, Hubei Kaichu Metallurgy, and Tianjin Toho Lead Recycling all cut output during April. 

 

The sluggish European economy sent spot lead prices tumbling during April, with #1 lead prices down nearly RMB 500/mt from March’s RMB 14,550/mt. Scrap battery prices, by contrast, were only down by RMB 100/mt as of April 22nd. As a result of continued losses, secondary lead smelters cut procurement prices for scrap batteries by RMB 150-200/mt, but scrap battery traders refused to sell at low prices, causing market supply to tighten and secondary lead smelters to then cut output. 

 

The lack of strong downstream demand is also discouraging smelters from maintaining output. Lead-acid battery producers reported lower orders in April following a brief surge in demand following the Chinese New Year holiday. High inventories and poor sales are prolonging the current price war among motive battery manufacturers, while automotive battery manufacturers also cut prices since battery replacement demand was slowing. In this context, secondary lead demand shrank due to weakness in downstream sectors, preventing secondary lead smelters from maintaining normal production.

 

Secondary lead smelters require relatively low costs to restart production, which enables them to respond quickly to price movements by cutting output. By contrast, primary lead smelters were still reporting slight increases in operating rates during April despite falling demand.