SHANGHAI, May 22 (SMM) – A turning point in social inventories of lead is expected to buoy prices after nearly half a year of weakness if higher costs continue to lift prices of secondary refined lead and drive downstream consumers to primary lead.
While prices of lead extended their declines in May, relatively smaller drops in battery scrap grew costs at secondary lead producers, and forced some small smelters to close. SMM learned that a shortage of battery scrap has kept costs across secondary smelters at the highest in nearly two years.
The shutdown reduced the supply of secondary lead, and thus drove up costs at secondary refined lead producers who use secondary led as feedstocks. This prompted large mills of secondary refined lead to firm up offers, which were almost flat against prices of primary lead.
If offers of secondary refined lead remain at highs, downstream interest is expected to shift to primary lead, and this will lower social inventories.
As of Wednesday May 22, costs at secondary refined lead producers stood at 16,320-16,590 yuan/mt, which translated to a loss of 200-400 yuan/mt. SMM calculated based on prices of battery scrap of 9,100-9,250 yuan/mt.