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[SMM analysis] the truth behind the decline in the operating rate of lead-acid batteries in the first seven months
Oct 9,2019 14:13CST
translation
Source:SMM
The content below was translated by Tencent automatically for reference.

SMM news: with the impact of new energy vehicles, shared bicycles, lead battery market demand continues to weaken, coupled with the lead market continues to be depressed, some enterprises have been in a state of losses for a long time, the enthusiasm of enterprises is poor, so the overall operating rate of lead storage batteries from January to July 2019 has declined compared with the same period last year. According to SMM data, the average comprehensive operating rate of lead battery enterprises from January to July 2019 is 61.74%, and the average from January to July 2018 is 59.53%. What are the reasons behind the decline in the operating rate?

(data source: SMM)

SMM believes that the operating rate of lead-acid batteries showed an overall downward trend in the first half of 2019, until July, when the operating rate of lead-acid batteries increased. On the other hand, there are three main factors affecting the decline of lead-acid battery operation rate.

First, the new national standard for electric bicycles was officially implemented on April 15, 2019, affecting the operating rate of storage enterprises in the first half of the year.

On the one hand, the new national standard strictly standardizes the production of electric bicycles, strengthens the inspection of certification bodies and production enterprises, ensures product consistency, and prevents vehicles that do not meet the new standards from obtaining CCC certification and entering the market. For acts such as unlicensed production by a production enterprise or production beyond the scope of compulsory product certification, those who verify the truth shall be ordered to stop production and be fined or confiscated according to law; if the circumstances are serious, their business license shall be revoked according to law; if the case constitutes a crime, criminal responsibility shall be investigated according to law.

On the other hand, storage enterprises on the battery "lightweight" is gradually in the transition, "lightweight" battery synchronous production, and non-standard car sales stores closed more, affecting dealers battery sales. In addition, consumers' recognition of the "new standard car" is relatively low, and there has been no significant improvement in the consumer market for the time being, dragging down the weakness of the battery.

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Second, the terminal consumer market is weak, resulting in a decline in the operating rate. From 2017 to 2018, annual car sales fell from 29.12 million to 28.08 million, a negative growth rate of-3.6 per cent. The auto industry remained weak until 2019, mainly because of the impact of some policies.

In 2017, the Ministry of Finance issued a notice on the reduction of the tax on the purchase of passenger vehicles with a emission of 1.6 litres or less, which stated that the reduction in the purchase of passenger vehicles with a consumption of 1.6 litres or less would be subject to a 7.5 per cent reduction in vehicle purchase tax in 2017. With effect from January 1, 2018, the vehicle purchase tax will be reinstated at the statutory rate of 10%. The withdrawal of the purchase tax in 2018 has had a direct impact on the decline in car production.

The introduction of license and purchase restrictions in first-and second-tier cities in 2018 has also affected car sales to some extent.

According to statistics, at present, more than 95% of the prefecture-level cities in the country are implementing policies to restrict relocation to varying degrees. The restriction policy of second-hand cars has affected the circulation of second-hand cars. The poor circulation of used cars has affected the sales of new cars. In addition to the impact of national policies, the economic downturn is also an important reason for the decline in car production and sales.

Third, the plummeting price of lead, strong risk aversion in the industry, so the consumer market is still not optimistic.

According to SMM research, from July 2018 lead prices as high as 20740 yuan / ton, lead prices have been showing a downward trend. In July 2019, the price of lead plummeted to 15660 yuan per ton, the lowest point thought to be the lowest in 2018. The price of lead continues to plummet, resulting in the production enthusiasm of lead battery enterprises is not high, and the start of lead battery is cautious. Although the impact of the Spring Festival holiday ended, the operating rate in March rebounded, but it was still 0.36% lower than in March 2018, and due to long periods of rainy weather in the south of the Yangtze River from March to April, the inventory digestion of dealers was slow, and the operating rate was still poor.

Until mid-July, the price of electric bicycle batteries rose for the first time in 2019, and the market saw it as a sign of improvement in consumption. Lead prices gradually improved, stimulating the purchasing enthusiasm of dealers, and the operating rate of battery enterprises also picked up. And because the electric battery enterprise is the largest lead consumption plate in the battery, the battery operating rate showed an upward trend in July.

Overall, although the lead-acid battery operating rate began to rise in July 2019, there has been no significant improvement in the end consumer market. Looking forward to the future, it is expected that the growth of demand for automobiles, communications, electric bicycles and new energy storage will promote the steady growth of China's lead-acid battery industry.

For queries, please contact Frank LIU at liuxiaolei@smm.cn

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