SHANGHAI, Sep 30 (SMM) – Social inventories of lead ingots further declined as lead-acid battery producers purchased intensively before the National Day holiday. Social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin decreased slightly by 5,800 mt from September 19 to 77,700 mt as of September 26. SHFE lead ingot warrant inventory fell 15,633 mt from the beginning of this week to 49,021 mt as of September 29. Due to the decline in inventory, SHFE lead rebounded above 15,000 yuan/mt. The SHFE 2211 lead contract hit the highest point at 15,045 yuan/mt today.
Recently, due to the power rationing in Yunnan and the pandemic in Anhui, the supply of lead-acid battery market was tight amid the peak consumption season. Amid the upcoming National Day holiday, what is the holiday plan of upstream and downstream enterprises in the lead industry chain? What are the guidelines for the follow-up lead prices?
In terms of primary lead, according to SMM research, the production of lead smelters remains normal, and there is no production shutdown due to vacation. Recently, the notice of winter energy consumption control in Honghe Prefecture of Yunnan Province was released, but it has not affected the production of refined lead. Among them, Mengzi Mining and Metallurgy conducted the maintenance as planned. In addition, according to SMM research, although smelters maintain normal production during the holidays, many smelters pre-sell due to the recent active stockpiling of the downstream. As such, the inventory is unlikely to increase sharply after the holiday due to the high operating rates of downstream.
In terms of secondary lead, secondary lead smelters in many regions maintain normal production during the National Day holiday, while smelters in a few regions have 2-4 days off. At present, some smelters in Guizhou, Jiangxi, Jiangsu, and Inner Mongolia disclose the holiday plans, but the impact on the overall supply of secondary lead is not significant. Therefore, the supply of secondary lead may further increase. As the downstream consumption further recovers, many secondary lead smelters will continue to produce during the holiday to ensure that the lead ingots can be delivered on schedule, which is one of the factors affecting the lead prices after the holiday.
In terms of lead-acid battery, amid the peak season of lead-acid battery in August and September, the supporting orders improved due to the increase in the production and sales of new cars. In addition, the demand for seasonal battery replacement picked up, and orders of enterprises increased. At the same time, due to the impact of high temperature and power rationing in August, lead-acid battery companies in Anhui, Zhejiang, Jiangsu and other regions restricted the production to varying degrees. As such, the in-plant inventory of finished products fell sharply, and some companies even experienced shortage (mainly medium and large-sized enterprises). Amid the end of the month, the National Day holiday is approaching. Considering the strong demand and shortage of goods, most medium and large-sized enterprises plan to take no or less holidays for the National Day (usually 1-3 days), and small-sized enterprises will take 3-5 days off.
Overall, according to the holiday situation of upstream and downstream enterprises, the supply of lead ingots during the National Day holiday may be slightly higher than the consumption. However, it is worth noting the pandemic situation in Anhui. Due to the pandemic control in Fuyang in Anhui Province, the largest lead ingot producing area in China (focusing on secondary lead), the procurement of raw materials of some lead smelters is restricted. If the closure and control time is prolonged, all major lead smelters will face the dilemma of raw material shortage. After the holiday ends, downstream enterprises will resume the production, and the inventory of lead ingots are expected to further decline. Therefore, the lead prices may continue to increase. However, if the pandemic ease after the holiday, the support for lead prices is limited.