Multiple secondary lead smelters are set to resume production, and the demand for battery scrap is expected to support lead prices [SMM Analysis]

In September, lead prices first fell and then rose, maintaining a range-bound fluctuation in October. With the downstream lead-acid battery market remaining mediocre, battery producers show low enthusiasm for purchasing lead ingots, leading to limited digestion of finished product inventories at smelters. The overall market activity in the lead industry is not high. Additionally, due to delivery factors, lead ingot inventories have shifted from in-plant inventory to social warehouses, turning into visible inventory, putting pressure on lead prices.

According to the SMM survey, primary lead smelters are expected to resume and start new production in October, with production expected to increase by about 7% MoM. Although secondary lead smelters have equipment maintenance and shutdowns, the production increase from resuming smelters is expected to exceed the decrease, with production expected to rise by about 2.5% MoM from September.

Looking at the current raw material inventory situation of secondary lead smelters, the days of battery scrap inventory are close to the dynamic average, indicating that raw materials are not abundant. The expected resumption of smelters will inevitably increase the demand for battery scrap. (Note: The SMM weekly dynamic battery scrap index averages the historical weekly inventory days of raw materials to observe the tightness of smelters' weekly raw material inventory.)

However, the current supply of battery scrap is limited, and its price is not only unable to follow the decline in lead prices but also has an upward expectation. Currently, secondary lead smelters are suffering significant losses, and the price of secondary lead is inverted compared to primary lead, providing some support to lead prices.

Meanwhile, the 91st CMF Macro Economic Hot Topic Seminar was held by the China Macro Economy Forum (CMF) on October 12. Liu Shangxi, president of the Chinese Academy of Fiscal Sciences, stated that fiscal and tax system reform includes three parts: central-local fiscal relationship reform, budget system reform, and tax system reform. Among them, central-local fiscal relationship reform is the core and pivotal, having a leading and supporting role in the other two reforms. These three reforms are like "one body with two wings" and must be organically linked, holistically designed, and coordinated to achieve the expected reform goals. The current central-local fiscal relationship reform should form a specific plan to increase the proportion of central fiscal expenditure to the level before the tax-sharing reform, at least to 30%-40%.

In summary, mediocre consumption, increased lead ingot supply, and accumulated social inventory drag down lead prices, while tight battery scrap supply and macro news boost lead prices. The lead price trend in late October may still maintain range-bound fluctuations.