According to an SMM survey, although 2024 saw a long-awaited window for lead concentrate imports, global lead ore supply could not match the expansion of domestic lead smelting capacity. From January to September 2024, the cumulative balance of lead concentrate remained in a state of shortage, and the trend of tight balance in lead ore supply was not completely reversed. Since mid-to-late August, why did lead concentrate TC slightly increase? SMM brings you an investigative analysis.
In terms of lead ore transactions and quotations, market quotes varied significantly. In mid-August, SMM surveyed that smelters in Henan raised the Pb50TC quotes from suppliers, and the processing fee for crude lead in Hunan rebounded first, but the Pb50TC quotes did not show significant changes at that time. By the end of August, the production enthusiasm of smelters in Hunan declined, fulfilling the expectations of maintenance and production cuts. By mid-September, lead concentrate TC quotes in this region saw a slight increase of 50-100 yuan/mt. In other regions, except for two smelters that significantly raised the processing fee for low-silver lead concentrate due to the accumulation of raw material inventories from their overseas mines, most smelters only made slight adjustments or negotiated more favorable pricing conditions without adjusting the Pb50TC quotes.
Behind the slight rebound in Pb50TC in September, firstly, various raw materials such as imported lead ore, silver-lead ore, and crude lead ordered by smelters previously arrived at the plants. Coupled with maintenance and production cuts in some regions, the days of raw material inventories increased to 45 days or more, prompting medium and large-scale smelters to raise purchase quotes. A trader mentioned that unlike the significant drop in imported lead ore prices earlier, recent quotes for imported lead ore transported to Henan, Inner Mongolia, and Huangpu Port for domestic trade saw an increase of 100-200 yuan/mt. He believed that the increase in smelters' raw material inventories was one reason, and another was that the completion of long-term contract pricing during the import window provided enough profit margin to meet the smelters' demand for higher TC quotes. Secondly, the short-term inability to support low TC operation through comprehensive recovery benefits was another factor. A smelter traced back to SMM that in the past, the comprehensive recovery technology in the lead smelting industry was not as advanced, with low silver recovery rates and other valuable metals treated as low-value slag, making it unprofitable. Therefore, the Pb50TC quotes at that time had to cover the lead smelting processing costs. However, around 2020, breakthroughs in comprehensive recovery and recycling technology in the lead smelting industry led to substantial profits and rapid capacity expansion, resulting in a supply shortage of lead concentrate raw materials (especially multi-metal lead ores that could not be comprehensively recovered in the past). The cut-throat competition among smelters led to a significant drop in Pb50TC. Recently, the smelter mentioned that the weakening prices of metals such as silver, antimony, copper, and zinc contained in lead ore were also reasons for their choice of maintenance or temporary production cuts. At this time, "clean" lead concentrate used for blending was no longer needed, leading to an increase in TC quotes for low-silver, low-content lead ore, while TC quotes for multi-metal lead ore with better content saw little change.
SMM believes that the decline in lead concentrate TC in September may only be a short-term impact brought by the replenishment of imported raw materials by smelters and the decline in comprehensive recovery profits leading to maintenance and production cuts. In the medium and long-term, the commissioning progress of lead-zinc mines still cannot meet the demand of domestic lead smelting capacity. The elasticity of resuming production for lead smelters with short-term production control is relatively large. Additionally, considering the winter storage in north China and the long maintenance cycles of domestic mines, the increase in TC quotes in the fourth quarter may be relatively limited. Although import traders were the first to raise the previously oversold import TC quotes, domestic lead-zinc mines still maintain the view of tight lead ore (silver-lead ore) supply. They are generally observing the smelters' price adjustment communication, and the increase in TC prices may be relatively limited.
