SHANGHAI, Oct 22 (SMM) –
Hot topic
The power rationing in Yunnan, Henan, and Hunan since July-August and the power rationing in Jiangxi and Guangxi in September are undoubtedly the current hot spots. According to a recent SMM survey, the power rationing in Jiangsu, Guangdong and other regions in China has continued. Since late September, the social inventory of lead ingots has declined due to the combined effects of losses, power rationing and environmental protection.
As of the end of September, power rationing has affected Hunan, Guangdong, Guangxi, Anhui, Jiangsu and other regions. Among them, the impact on primary lead in Hunan, Guangdong, Guangxi and other regions is 500-600 mt/day. The impact of secondary lead companies in Anhui, Guangdong and other places exceeds 2,000 mt/day, and the impact on downstream lead storage battery companies in Jiangsu, Guangdong and other places reaches 500-600 mt/day.
Lead demand and supply in 2021
Review of the Lead Market in 2021
Stimulated by the recovery of the pandemic, LME lead prices hovered at highs amid continued inventory declines. Although the domestic lead price has not risen as much as overseas, prices have trended higher.
In terms of inventory, consumption has gradually recovered since mid-to-late March. LME lead inventory has declined. However, the domestic inventory began to accumulate sharply at the end of April, and there has been a scissors gap between domestic and overseas lead ingot inventories.
Lead ingot exports are expected to rise in third quarter
According to previous research by SMM, the SHFE/LME lead price ratio gradually narrowed in 2021. According to the export trend of lead ingots in recent years, SMM expects that the export of lead ingots is expected to rise in the third quarter.
Lead concentrate TCs continue to fall
According to SMM statistics, domestic lead concentrate TCs have continued to fall in 2021. For spot lead ingots, lower TCs means a decline in lead smelting profits, and lead has become a by-product.
As for primary lead smelting companies, SMM has investigated the routine maintenance plans of various companies in the third-fourth quarter of 2021, and many companies will conduct maintenance from October to November.
According to SMM survey statistics, it is estimated that in the second half of 2021, the new production capacity of secondary lead will reach 810,000 mt.
The correlation between secondary lead output and profit declines amid new and expansion capacity
According to the SMM survey, the output of secondary lead was highly correlated with corporate profits previously. However, the correlation has declined amid new and expansion capacity.
Inventory and cost continue to play a game
As of September 30, the social inventory of lead prices reached 206,000 mt, the highest level since December 2013, an inventory level before the domestic supply-side reform. The accumulated lead ingots in the second quarter was 73,400 mt, and the accumulated storage in the third quarter was 80,000 mt. In the fourth quarter, under the interference of the overhaul of primary lead and the power rationing, the tightening of supply may reduce the pressure on the accumulation of lead ingots.
Consumption is improving during traditional peak season
In the third quarter, orders for industrial batteries such as base stations were stable, and the consumption of electric bicycle batteries was good, but slightly moderate; the recovery of automobiles was limited, mainly due to the shortage of automobile chips and restricted battery exports. During this period, the prevention and control of the pandemic in Jiangsu since August has also disrupted the production of battery companies. After September, the impact of power rationing in Jiangsu and Guangdong has intensified. In the fourth quarter, pay attention to the growth expectations brought about by the end-of-year routine production and sales.
Lead ingot supply and demand balance 2020-2021Q4E (10,000 mt)
According to the SMM statistics, it is expected that the surplus of lead ingots in the fourth quarter is expected to drop to 18,000 mt, a decline from the second and third quarters.
Lead market outlook for the third and fourth quarters
SMM believes that in the fourth quarter, global coal power and other energy problems continued, or continued to interfere with upstream and downstream companies in the lead industry chain. Domestic primary lead has entered a period of centralised maintenance, which may lead to a slowdown in the subsequent accumulation of lead ingots. Lead prices are expected to move higher than the third quarter. Notably, the newly expanded production capacity of secondary lead is still coming online. In particular, high profits will stimulate the enthusiasm of secondary lead enterprises to produce and will still put pressure on the lead prices in the mid-to-long term.
