SHANGHAI, Jun. 25 (SMM) – SMM’s latest survey of 12 domestic secondary lead smelters revealed the average operating rate at the surveyed smelters during May fell by 8.21 percentage points MoM to 37.23%, the lowest average of the year so far.
The average operating rate at large smelters with capacities above 150,000 mt/yr fell by 12.69 percentage points to 41.07%, due mainly to maintenance at Anhui Huaxin Lead Industry. Production cuts of Baoding Anjian Nonferrous Metals and Tianjin Toho Lead Recycling all drove the rate at small smelters with capacities below 100,000 mt/yr down by 28.85 percentage points MoM to only 18.84%. Operating rates at medium smelters averaged 36.11% during May, edging down by 1.07 percentage points MoM.
Low prices for secondary lead were the primary contributor to the decline in operating rates. SMM data show the average price for #1 lead dipped below RMB 14,000/mt for the first time this year in May, falling to RMB 13,780/mt. In response, the average price for secondary lead fell by RMB 350/mt, and when combined with high raw material costs, most secondary smelters were reporting losses and were discouraged from producing. Some enterprises even opted to purchase secondary lead instead as market prices fell below costs.
Tight supply of scrap batteries also resulted in lower operating rate at secondary lead smelters. Several smelters in Hebei, Henan and Hubei province all cut procurement prices for scrap batteries in late April by RMB 150-200/mt to RMB 7,500/mt in order to reduce costs, but in the process lowered recycler selling interest and made sourcing scrap batteries more difficult. As a result, most secondary lead smelters cut production and used existing raw material stocks. Smelters were then forced to raise procurement prices in late May by RMB 50-100/mt, but supplies still remained tight.
Weak demand downstream also continued to constrain secondary lead production. Motive lead-acid battery producers were in the middle of another price war due to high finished goods inventories and poor sales, while ignition battery demand was negatively affected by the decline in automobile output during May.