SHANGHAI, Aug 4 (SMM) - Li Daisheng, director of SMM's big data department, shared the market information of lead, zinc and tin industries with the audience in an online live broadcast. According to Li, the tight waste battery supply in the lead industry was expected to extend to the second half of the year, and the lead prices were likely to rise slightly, not dramatically, in the third quarter with the arrival of the peak season of lead-acid battery consumption. SMM believes that the tight supply of raw materials will remain an enduring problem in the lead industry in recent years, and judging from the information SMM gathered about lead concentrate TCs and the supply of scraps, the current supply of raw materials stays tight while the lead ore supply is relatively stable. However, the amount of imported ore in the past two years were greatly affected by import profits and loss.
SMM statistics show that since 2021, the domestic lead ore has been in a net export, with huge import losses. The import volume of lead concentrates in 2022 dropped significantly compared with the previous year. At present, the shortage of waste batteries is of particular concern to the market. This situation will continue for a long while due to the extremely excess capacity of secondary lead. Since 2020, with a large amount of secondary lead capacity put into production, the problem of overcapacity deteriorated. As a result, the average operating rate of secondary lead smelters always remained between 40% and 50%.
SMM expects that the shortage of scrap supply in the second half of the year will hardly improve, so the weekly operating rate of secondary lead manufacturers in the second half of the year is unlikely to return to the high level of the same period in recent years. In addition, the lead smelters suffered thin profits, hence it is expected that the average operating rate in the third quarter might rose on the quarter due to the peak season, but the production will still fall short of the demand. At present, the inventory of lead ingots is falling, and according to SMM survey, some large lead-acid battery companies plan to ran at full capacity in the second half of the year. Considering that the lead prices are more stable compared to the prices of other nonferrous metals, they are expected to rise slightly in August, September and October, but a significant increase is unlikely. The fundamental reason for the limited increase is that it is difficult to solve the overcapacity of secondary lead, and the supply and demand might face imbalance in the short term. Therefore, SMM is not be particularly bearish towards the lead prices in the long term. On the demand side, exports and energy storage are the two major bright spots in lead consumption. SMM predicts that exports in the second half of the year may decline as overseas demand weakens, and the main increase in lead consumption will rely on energy storage in the next five years. In this case, SMM expects the lead prices to fluctuate upwards modestly. When asked whether the trade-in season of downstream electric vehicles will boost the lead demand, Li said that the demand for lead is usually high from July to October each year, a peak season of trade-in, but whether the lead prices will climb accordingly mainly depends on whether the seasonal fluctuations will be stronger than previous years. Since June this year, the domestic demand has been gradually recovering, and the replacement of lead-acid batteries has accelerated due to high temperature, evidenced by falling finished product inventory of the enterprises and the declining weekly operating rate of battery producers according to SMM survey. That is also why SMM believes that the lead prices will increase in the third quarter.
