Premiums of secondary lead unlikely to be sustained

Published: Aug 21, 2018 16:35

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Offers for secondary refined lead exceeded those for primary lead as secondary lead smelters held back on losses

SHANGHAI, Aug 21 (SMM) – Offers for secondary refined lead exceeded those for primary lead as secondary lead smelters held back on losses. However, such premiums are unlikely to sustain given poorer downstream demand from the battery industry, SMM believes.

As of Monday August 20, secondary refined lead was mostly offered at a premium of 50 yuan/mt to a discount of 50 yuan/mt over SMM #1 lead. Premium offers attracted few trades, SMM learned. The price of SMM #1 stood at 17,600-17,750 yuan/mt on Tuesday August 21, flat from that on Monday August 20.

A faster decline in lead prices over battery scrap from the start of July narrowed profit margins across secondary lead smelters. Small secondary lead producers in Henan, Hebei, Jiangxi, and Guangdong provinces cut or suspended production as profits shrank.

As cuts and suspensions lowered supplied of secondary lead, downstream demand from the battery industry shifted to primary lead as price advantages of secondary materials shrank. SMM believes that the shift in demand for secondary lead is unlikely to support its premiums over primary lead.

The price spread between secondary refined lead and primary materials started to narrow from mid-July as profits shrank in the declining market and as battery scrap prices remained firm.

On Thursday August 16, most offers for secondary refined lead were heard at discounts of 74 yuan/mt ex-factory against the SMM #1 primary lead price. This compared with a discount of 100-200 yuan/mt in late July and 400-500 yuan/mt at the start of July.

Market commentary Secondary lead

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