SHANGHAI, May 22 (SMM) – China’s social inventories of primary lead are likely to extend their declines as environmental probes in secondary lead production continue to weigh on output of secondary lead. This has driven up prices of secondary lead prices, SMM believes.

As of Friday May 18, social inventories of primary lead across China stood at 19,000 mt, down 2,000 mt from a week ago. The falling inventories drove up domestic prices of primary lead, with SMM 1# lead ingots assessed at 20,150 yuan/mt on average as of Tuesday May 22. This is up 700 yuan/mt from 19,450 yuan/mt a week ago and up 1,650 yuan/mt from 18,500 yuan/mt a month ago.

Inventories of primary lead continue to shrink as the narrowing price spreads between primary and secondary lead drove consumers towards primary lead.

From May 9, environmental inspection teams settled across Guizhou, Jiangxi and Anhui provinces. Some secondary lead smelters had to suspend production, and this will affect some 1,500 mt of daily output across the three provinces. This drove up prices of secondary lead prices and eroded some of the output recovery of primary lead after maintenance works at some smelters ended.

As of Friday May 18, lead ingot inventories on the Shanghai Futures Exchange declined 25.1% from a week ago to stand at 5,185 mt while social inventories of lead across Shanghai and Guangdong stood at 11,400 mt, down 1,000 mt week on week and down over 40,000 mt year on year.

The growing lead market also spurred traders and some downstream battery plants to stockpile.

SMM sees further downward room for primary lead inventories as environmental probes continue. As the mid-year approaches, some battery plants are likely to step up production to improve their statistics in their mid-year financial reporting and this is like to further lower inventories of lead.

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