SHANGHAI, Oct 19 (SMM) – The supply surplus in the Chinese lead market is likely to expand in 2019 as demand slows and as new capacity of secondary materials gain popularity, SMM senior analyst, Xia Wenming, at an annual pricing conference for the metals industry organised by SMM on Friday October 19
Lead consumption across electronic bikes, motorcycles and battery exports is likely to decline amid a slew of environmental protection efforts and trade tension with the US, Xia told delegates.
The automobile sector is a key driver of lead consumption even as vehicle production could slow as purchase tax discounts on cars are removed.
The establishment of 5G communication systems and networks may bolster lead consumption in 2019-2020, but global trading trends and geopolitical tension will take center stage, Xia added.
In recent years, imports grew and exports shrank in the Chinese lead-acid battery market due to the US tariffs and inflows from countries in South-east Asia with lower costs of production. Declining battery stocks reflected an increasingly risk-averse sentiment among traders, Xia said.
Even as the secondary lead sector is affected by technological upgrading for environmental efforts, large amounts of new capacity would be built in the next two years.
SMM data showed that about 835,000 mt of new secondary lead capacity will be commissioned in 2018, subject to potential disruptions on environmental grounds.
Xia expects the most active SHFE lead contract to trade at 16,500-20,500 yuan/mt in 2019 with its LME counterpart at $1,850-2,450/mt.