(Xia Wenming) [lead and Zinc Summit] the recovery of global consumption in the post-SMM: era is expected to lead prices in 2021.

At the 16th lead and Zinc Summit held by Shanghai Futures Exchange and SMM in 2021, Xia Wenming, senior analyst of SMM lead industry, reviewed the lead market since 2021, analyzed the contradiction between supply and demand in 2021, and looked forward to the trend of lead price in 2021 under the expectation of global consumption recovery in the post-epidemic era. She said that

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I. Review of lead market and relevance of trading indicators so far in 2021

The changing trend of lead inventory and position

The change of lun lead inventory in the first quarter of 2021 is similar to that in the middle of 2020. Under the background of surplus, artificially concentrated removal of inventory (transfer inventory), in line with the rise of domestic lead prices, and then rapidly increased, during which LME lead 0-3 maintained a Contango structure (near weak and far strong).

The change of social inventory of lead ingots and the operation trend of lead price in recent three years

In the past three years, most of the Q1 period is lead ingots. Due to the epidemic situation, it is difficult to restore lead production in 2020, and the pace of removal is earlier than in previous years. In 2021, it will return to the normal pace of previous years, and due to the new expansion of production capacity of recycled lead, the inventory base of lead ingots in 2021 will be higher than in previous years. As of May 14, social stocks of lead ingots reached 84000 tons, the highest level since August 2016.

The correlation signal between Shanghai lead and recycled lead profit and loss:

In the lead price rising cycle, pay attention to the discount degree of recycled lead, more than 200 yuan / ton, close to 500 yuan / ton, there is a signal of shorting; in the process of lead price decline, pay attention to the profit and loss of recycled lead, the loss is more than 0, nearly 200 yuan / ton, recycled lead enterprises may reduce production, become a signal to be long.

Second: analysis of the contradiction between supply and demand in the market in 2021

The influence from overseas is transmitted to China-- the import of lead concentrate is blocked and the TC of imported ore is reduced.

Imports of lead concentrates in 2020 were 1.343 million physical tons, down 19.9 per cent from the same period last year, of which more than 80 per cent came from the top 10 importing countries.

Due to the impact of the epidemic in 2020, the output of overseas mines decreased, at the same time, the loading and unloading capacity of ports was insufficient, the shipping cycle increased, shipping costs soared, and the cost of mine imports increased.

Overseas recovery after the epidemic in 2021, waiting for the seasonal recovery of mineral supply, but at present, mineral imports in the first quarter were 270000 physical tons, only a small increase of 2 per cent over the same period last year.

Domestic and foreign mine supply maintains tight pattern lead concentrate processing fee shows no sign of falling for the time being.

From a historical point of view, since the third quarter of 2019, imported mines have gradually increased, hitting the domestic mining market, lead concentrate processing fees have been rising, and the epidemic situation has become an inflection point.

In the third quarter of 2020, the domestic solid waste law announced that the transportation of waste batteries became tight, which triggered a rise in the contradiction of mine supply. In the fourth quarter, it continued to be dragged down by domestic seasonal production reduction and import and shipping, and continued to last until the first quarter of 2021. Focus on the seasonal resumption of production of domestic mines in the second quarter. Domestic production reached 259000 metal tons in the first quarter, up only 50% from the same period last year, but the driving force in the second quarter was limited (the "14th five-year Plan" energy consumption double control target, such as Inner Mongolia's restrictions on high energy-consuming industries), and lead concentrate processing fees continued to weak. and has fallen to flat water in the third quarter of 2019.

Supply side: the output of primary lead continues to increase steadily, and the subsequent attention should be paid to the mine supply and the raw material structure of the refinery.

According to SMM research, the cumulative output of primary lead from January to April in 2021 was 1.059 million tons, an increase of 8.8% over the same period last year. Therefore, from the point of view of the impact, the tight supply of lead concentrate did not directly affect the ingot end production from the mine end, mainly due to the increase in production costs.

Supply side-total new production capacity of recycled lead in 2021 is 1.18 million tons.

Looking back in April, although the recycled lead plate coexisted with primary lead for overhaul and recovery, there was still some new production capacity to be released, with an estimated additional capacity of 1.18 million tons.

Supply side: environmental protection is included in the new expansion, and the regional supply pattern of recycled lead is changed.

The output of recycled lead is in a state of quantity, and the regional supply difference may expand in the second half of the year.

According to SMM, the cumulative production of recycled lead from January to April in 2021 was 1.163 million tons, an increase of 146.9 percent over the same period last year.

Since the beginning of this year, the newly expanded production capacity of recycled lead has continued to be released, excluding the special factors of the epidemic in the same period last year, and the overall monthly output is also significantly higher than in previous years, with a high production base of 25-300000 tons of flat water this year and 15-200000 tons in previous years. Output for the whole year is expected to increase by 3% compared with the same period last year.

Consumer side: the main use of lead-acid batteries continues to increase.

As of March, enterprises of large scale and above had produced a total of 7.081 million electric bicycles, an increase of 86.3% over the same period last year.

As of April, automobile production and sales totaled 858.6 million and 8.748 million, an increase of 53.4% and 51.8% over the same period last year.

Comparison between operating rate and finished product inventory of lead-acid battery enterprises in recent years

The dilution of epidemic factors in 2021, coupled with the government's promotion of local celebrations during the Spring Festival, will facilitate enterprises to speed up the progress of resuming work after the festival. the operating rate of lead battery enterprises in the first quarter is higher than that in the same period in previous years, but the off-season cycle of traditional consumption in the second quarter remains unchanged. The trend of operating rate in the next three months is expected to weaken. In addition, under the background of chip shortage, automobile production is restrained, and lead consumption in the peak season of 3-4 quarters may be disturbed.

2017-2021 E balance sheet of lead supply and demand in China (10,000 tons)

From the annual balance point of view, the supply side (primary and recycled lead) continues the upward trend, while imported lead decreases due to the ratio of imported lead, while lead consumption is missing due to the epidemic, the proportion of lithium electricity substitution for electric vehicles increases, coupled with the lightweight of batteries; the output of new cars affects the decline of matching orders, the impact of automotive battery exports (second quarter), lead consumption tends to decline, the probability of accumulating storage throughout the year increases, and the oversupply is expected to be 40,000 tons. It makes the center of gravity of lead price move down greatly.

The cycle between the price difference of recycled refined lead and the inventory of lead ingots: destorming-regenerating rising water-regenerating increasing production-regenerated lead discount-restocking.

"Click to view the SMM lead industry chain database

Three: lead price forecast in 2021

Generally speaking, in the post-epidemic era, the level of global inflation has risen, and the prices of raw materials have risen generally, in which lead is in tight supply from the mine end and scrap, but the ingot end of the Chinese market still shows an increasing trend, and the accumulation of storage and cost continues to play a game. It is expected that Lun lead will run at 2050-2300 US dollars / ton in the second half of the year, while Shanghai lead will run at 14350-16500 yuan / ton. The third quarter is the peak season of traditional consumption, regional supply asymmetry and cost and other factors, or the mismatch between supply and demand, become the most likely period of high prices.