SHANGHAI, Sep 7 (SMM) – Lead futures registered a significant monthly decline by 6.6% in August. As of August 31, the most traded SHFE lead contract closed at 15,025 yuan/mt, a decrease of 1,065 yuan/mt during the month.
Spot quotations of SMM #1 lead ingot averaged 14,950 yuan/mt on August 31, down 800 yuan/mt or 5.1% from early August.
Operating rates of primary lead smelters declined in mid-August due to the power curtailment and pandemic. Later in the month, the smelters in Henan and Anhui resumed production, and the operating rate averaged 59.4% in the week ended August 20, up 2 percentage points from the beginning of the month. Domestic refined lead output in August is expected to increase slightly to 285,500 mt.
As for secondary lead, Jiangsu New Chunxing further expanded production after the technical transformation in August, and the output of Tianchang and Dadao in Anhui also increased amid longer working hours in August. The output of Inner Mongolia Jinfan increased after the new capacities were put into production. Guizhou Huoqilin is planning to put new capacities into operation. The overall secondary lead output is trending upward. Secondary lead output is expected to increase on the month in August, and is likely to further rise in September. The production capacity of secondary lead is expected to increase by 810,000 mt in H2 2021.
Domestic lead ingots kept rising since the end of April and continuously hit new record highs since 2014. Social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin totalled 206,300 mt as of August 30, up 143,700 mt or 229.6% from the end of April. SMM expects the inventories to keep rising in the short term as the supply grows, and the impeded shipping dragged down the exports of lead ingots.
Lead-acid battery was in the traditional peak season of consumption in August, and the replacement demand for electric bicycles is rising steadily. Major companies gradually increased production. However, consumption in the automotive battery market was flat. At the same time, the production was cut down in Jiangsu and other regions with severe pandemic. Downstream users maintained cautious purchase on rigid demand.
Downstream companies will normally start to restock before the National Day Holiday in September. SMM will continue to monitor the downstream restocking and the impact of pandemic control in Jiangsu. Secondary lead prices are supported by the costs, but new capacities are expected to be put into production, which is likely to weigh on the prices. SHFE lead contracts are expected to trade between 14,700-15,200 yuan/mt in September.