Reasons for the lower-than-expected recovery of primary lead smelters in August and the scheduled maintenance and production for September [SMM Analysis]

In early August, as the imported crude lead and imported lead bidding orders successively arrived on schedule, the raw material inventories of some primary lead smelters significantly increased. Some previously overhauled smelters resumed production, resulting in an increase in primary lead production by nearly 10,000 mt in August. However, compared to SMM expectations from early August, the production increase fell short of expectations. Various factors contributed to this—on one hand, the expected production increase at smelters in Henan did not materialize as anticipated, and one smelter's September maintenance was moved up to the end of August, slightly impacting production. On the other hand, smelters reduced output beyond expectations; a smelter in Shaanxi revised an earlier production reduction plan to maintenance due to tight lead-zinc ore supply, and smelters in Shandong and Jiangxi also made unexpected slight cuts to production.

Entering September, lead prices continuously fell, dropping below the 17,000 yuan/mt barrier and approaching the 16,000 yuan/mt mark. The supply-demand mismatch of lead concentrate persisted, with certain lead ore suppliers still considering lowering processing fees to compensate for inventory value losses caused by declining lead prices. Despite the slight increase in TC quotes for low-lead content lead concentrates following the accumulation of raw material inventories at smelters, there was almost no rebound in lead TC from silver-lead ores, resulting in thin overall refining profits for lead smelters.

After the import window opened in August, smelters seized the right timing to price appropriately, which helped spread out procurement costs for lead concentrate. However, after the import window closed in late August, imports and trading turned sluggish again, slowing the growth of smelters' raw material inventories.

As a result, the enthusiasm for production among primary lead smelting enterprises generally declined. Besides, some smelters extended their routine maintenance cycles, while small-scale smelters in Henan and Hunan underwent maintenance, reduced production, and cleared inventories to recover funds. These smelters have not mentioned clear recovery plans, instead basing production recovery expectations on factors such as inventory clearance progress, raw material procurement, and signs of stabilizing lead prices. The number of smelters undergoing maintenance in September increased, mainly large and medium-sized ones, with the expected decrease in primary lead production projected to exceed 30,000 mt in September.