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Tight battery scrap supply, maintenance to keep spot lead prices above 16,000 yuan/mt

iconMay 29, 2019 12:13
Source:SMM
The SHFE 1907 contract has fallen below the 16,000 yuan/mt mark

SHANGHAI, May 29 (SMM) – Spot lead prices across Chinese markets are likely to find support at the 16,000 yuan/mt level, as tight battery scrap supply keeps costs firm for secondary lead and as maintenance at primary lead smelters will likely to extend declines in social inventories in the short term.

In the futures market, lead prices fell below the 16,000 yuan/mt mark. The most active lead July contract on the Shanghai Futures Exchange slid for a third straight day on Wednesday, trading at 15,960 yuan/mt by midday.

US-China tensions, downbeat Chinese economic data and expectations for a secondary lead supply recovery from environmental probes will keep prices of futures weak in the short term.

With high prices of battery scrap, secondary lead refiners saw a loss of 200 yuan/mt as of Tuesday May 28, and smelters saw a loss of 100 yuan/mt, excluding taxes. Despite costs, sluggish demand kept secondary refined lead in a discount of up to 100 yuan/mt against the average of SMM 1# lead as of Tuesday. This grew uncertainties over the production recovery at secondary lead smelters from environmental inspections.

Lower social inventories are also expected to offer support to prices. SMM data showed that social inventories of lead ingots in China decreased by 4,600 mt week on week to stand at 35,300 mt as of Friday May 24, after an increase of 4,100 mt in the previous week.

The ongoing overhaul at Hechi Nanfang and Chifengshan Gold, Silver & Lead as well as planned maintenance at Hunan Shuikoushan and Hanzhong Zinc Industry are likely to extend declines in lead social inventories in the near term.

A pick-up in operating rates across lead-acid battery producers, which is a sign of demand improvement, is also supportive of spot lead prices.

Battery producer operating rates rebounded as production recovered on eased inventory pressure after output cuts and holidays since the end of April. The approaching end of the first half of the year drove some large battery plants to step up production for better results in their mid-year reports, which also helped lift the average operating rate.

Market commentary
Lead

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