Significant Increase in Secondary Lead Raw Material Inventories? Battery Scrap Prices Still Expected to Rise? [SMM Analysis]

According to the latest data from SMM, the days of raw material inventories at secondary lead smelters have risen to 16 days, significantly higher than the dynamic average. However, during the traditional off-season for battery scrap, the market is experiencing a tight supply. Why has the raw material inventory increased so significantly? This can be attributed to secondary lead production.

On Tuesday at 8 PM, secondary lead smelters in Anhui received a warning to halt production to comply with environmental protection-related controls. The companies shut down their furnaces and kept them warm while waiting for further notice, resulting in a 19.31 percentage point decline in the weekly regional operating rate. The weather conditions this week will still need to be monitored, and it is uncertain whether normal production can be fully resumed. Henan also faced environmental protection-related controls, but the impact was slightly less than in Anhui, with the regional operating rate declining by about 7 percentage points. In Hebei, a warning was issued at 6 PM on Thursday, and smelters generally reduced production by 50% to comply with environmental protection-related controls. According to SMM weekly production sample statistics, last week's production decreased by over 10,000 mt WoW.

With production declining and normal purchases of battery scrap, the raw material inventory at smelters is being consumed more slowly, resulting in relatively ample inventory data.

Additionally, recent battery scrap prices have remained relatively stable, while lead prices have fluctuated upward, providing smelters with a certain profit margin. Therefore, after this round of production cuts due to environmental protection-related controls, many smelters are eager to resume normal production as soon as possible to capitalize on the market conditions. Large secondary lead enterprises in Jiangxi, Anhui, and Shandong are all willing or are about to resume production and feed raw materials.

As we approach late November, a new round of long-term contracts is about to begin, but the production cuts have also affected the delivery of this round of long-term contracts. Therefore, smelters have a relatively strong desire to resume normal production. Even though the production cuts last week have resulted in relatively ample raw material inventories, smelters expect a significant increase in battery scrap demand this week. On Friday afternoon, some smelters in certain regions issued notices of raw material purchase price increases for Saturday. SMM expects battery scrap prices to continue rising this week.