SHANGHAI, Dec 5 (SMM) – Strong support at the 18,000 yuan/mt level for SHFE lead is likely to wane in 2019 when secondary lead capacity expansion eases supply tightness across the Chinese market.
In the fourth quarter of the year, SHFE lead bargain-hunters appeared keen to purchase at the 18,000 yuan/mt level, which is the cost for smelters to produce a tonne of secondary lead.
High battery scrap prices, bolstered by supply shortages and high battery prices, kept costs across secondary refined lead smelters at 18,000 yuan/mt in 2018.
The ratio of finished goods inventory to sales remained low across secondary lead smelters. This, together with low social inventories of primary lead, kept the lead market being tightly supplied.
Output cuts at secondary lead smelters that would begin when lead prices fall below 18,000 yuan/mt could tighten supplies across the market in a short time. Price spreads with primary materials would narrow and spot premiums would remain high.
With new secondary lead capacity coming online in 2019, secondary lead stocks across smelters and social inventories of primary lead are expected to climb from current lows.
