SMM Network News: the recent market risk appetite rebounded as a whole, the stock market and commodities strengthened together, driven by the resonance of basic metals, lead prices continued to rebound. From the performance of the lead market in the first half of the year, on the one hand, the supply reduction is greater than the demand reduction due to the impact of the epidemic, on the other hand, the different rhythm of the epidemic at home and abroad caused a phased mismatch between supply and demand. The overall performance of the lead market in the first half of the year is 15000 tons, which is better at home than abroad. At present, the global inventory level is less than 100000 tons, and the overall inventory level is on the low side. For the second half of the year, we believe that the lead market will maintain a wide oscillation pattern under the background that both the supply and demand sides will recover.

Reduction of lead concentrate processing fee

Affected by the epidemic in the first half of the year, mines at home and abroad once reduced or stopped production, and concentrate production was reduced by about 50,000 tons, but this is not enough to change the balance of the lead concentrate market. Global lead concentrate production fell by 5% in the first half of the year, and the influence abroad was greater than that at home, and lead concentrate processing fees were reduced. In the second half of the year, the edge of the mine improved, Peru, Bolivia, Mexico and other countries relaxed restrictions on the mining industry, mine production decreased due to the interference of the epidemic, and the supply margin improved. In addition, from the results of the overseas long order TC negotiations this year, the lead concentrate TC is in the range of 175 US $182.5 per ton, and the increase in processing fees also reflects the loose expectation of the mining market in the future.

Supply is facing a rebound

We estimate that lead supply will grow by about 0.5% in 2020. For primary lead, it is expected that the rebound in profits will lead to a steady rebound in supply. On the one hand, processing fees will rise to a three-year high; on the other hand, the price of silver, a by-product, continues to rise and refinery profits have improved significantly. Judging from the data performance, the average operating rate of the original refinery in the first half of the year was 60%, lower than the average level of 64% last year, so there is still room for improvement in the second half of the year. Domestic production of primary lead is expected to increase by 50,000 tons in the second half of the year compared with the same period

For recycled lead, it gradually relaxed in the second half of the year, and the supply increment was larger than that of primary lead In the first half of the year, recycled raw material waste lead-acid battery once became a bottleneck factor in supply. in the long run, the supply of waste depends on the theoretical scrap quantity of waste battery. According to estimates, waste batteries in 2020 do not take into account the theoretical scrap of channel damage of 2.15 million tons, relative to the total capacity of regeneration is tight. In the short term, recycled lead raw materials become loose with consumption, logically, the better battery consumption, the more waste lead-acid batteries replaced and eliminated, the more abundant recycled lead raw materials, so the start-up trend of lead-acid battery enterprises is highly consistent with that of recycled lead enterprises. Consumption in the second half of the year is generally better than that in the first half, the scrapping rate of waste lead-acid batteries has increased, the shortage of raw materials for recycled lead has been alleviated, and the output of recycled lead in the second half of

Pay attention to the contradiction between accumulation and storage

Lead is used in the terminal field, and there is room for the recovery of lead in the domestic automobile field. Since June, the lead market has not seen a significant price adjustment, the market is mainly trading demand expectations and low inventory during the peak season. In the second half of the year, attention should be paid to the possibility that the increase in finished product inventory of lead-acid battery suppresses consumption in the peak season.

On the whole, the fundamental lead market supply exceeds demand, and macro expectations deviate from the reality of the industry. However, the lead market basically faces the relative weakening of the price impact, which also leads to only a small adjustment in the lead price under the acceleration of the short-term lead accumulation pool. The growth of recycled lead resumed in the second half of the year, and the growth rate of supply was faster than the growth rate of consumption. in the third quarter, due to the removal of 10,000 to 20,000 tons in the peak consumption season, the price remained strong, but the pressure on the accumulation of lead in the fourth quarter greatly increased, and the overall lead price will fluctuate widely in the second half of the year. Lun lead is expected to fluctuate in a range of US $1600 / ton, while the main fluctuation range of lead prices in Shanghai is 13000 won / ton. The investment strategy pays attention to the intertemporal positive set under the back structure, accumulating the stock in the fourth quarter, waiting for the price to run to the fluctuating upper edge to sell short. The risk point is concerned about the persistence of macro risk appetite and the problem of supply disruption caused by environmental protection.

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