According to the SMM survey, the cost differences among primary lead smelters mainly lie in smelting processing costs, raw material structure, procurement channels, and other factors.
In terms of smelting processing costs, coal prices in 2024 fell back from highs in 2023. As of December 17, 2024, the average price of SMM Grade 1 metallurgical coke in 2024 decreased by nearly 15% compared to the 2023 average price. Additionally, with the completion of energy-saving technological transformations such as waste heat recovery and energy storage solutions in smelters, energy prices and costs are no longer frequently mentioned by lead smelters. Other cost components, such as labour, natural gas, oxygen, and smelting additives, showed no significant fluctuations. According to the SMM survey, although the raw material structures of domestic primary lead smelters vary greatly, the smelting processes are relatively mature and stable. After multiple rounds of technological transformations, most smelters primarily use oxygen-enriched bottom-blowing furnaces equipped with independent oxygen production units, with some adopting continuous furnace designs to reduce energy consumption.
Traditional lead smelting capacity uses lead concentrates with a grade of 45-55 as raw materials. However, under the condition of persistently low lead concentrate TC prices in 2024, some lead smelters reduced the grade of lead concentrate and increased the input of low-grade (35-45) lead concentrates containing associated multi-metals such as copper, zinc, and silver. The grade of lead affects lead recovery rates, thereby increasing the smelting cost per ton of lead metal but significantly improving the recovery efficiency and overall revenue of other valuable metals. In 2024, medium- and large-scale primary lead smelters and smelters with integrated multi-metal recovery projects can fully offset lead smelting losses and maintain profitability through by-product profits and raw material procurement advantages. However, to ensure output value and profits, there may be cases where the grade of lead metal declines, leading to reduced refined lead production. Therefore, except for a few manufacturers using crude lead, oxidized lead ore, or lead-zinc smelting recovery residues as raw materials, the estimated smelting processing cost of primary lead for 2024 is approximately 2,000-2,500 yuan/mt, showing a slight decline compared to 2023.
Additionally, differences in raw material structures also result in significant variations in procurement costs. With the expansion and commissioning of integrated recovery projects and battery scrap dismantling projects in Henan and Hunan smelters, the proportion of non-lead concentrate raw materials at primary lead smelters is expected to rise to about 40% in 2024. During the peak season for battery scrap recovery in Henan, the ratio of lead-containing scrap to lead concentrate in smelters is close to 1:1. Several smelters also consistently procure lead-containing residues from tin-antimony and zinc smelting for blending and integrated recovery. Besides differences in raw material structures, lead concentrate procurement channels and equity structures also lead to significant variations in raw material procurement costs. Regarding imported ores, the SMM survey indicates that about half of domestic enterprises are involved in imported ore procurement. In 2023, imported ores accounted for 33.59% of the total production volume of domestic smelters. In H2 2024, with the concentration of imported ores arriving at ports, the proportion of imported ores is expected to increase slightly by 2-3 percentage points. Furthermore, with the opening of the import window in 2024, smelters procuring imported ores will have better pricing opportunities, resulting in higher profits from imported ore smelting compared to 2023.
Based on the primary lead cost curve (including estimated raw material procurement costs), 37.3% of primary lead smelter capacity has costs moderately below the SMM 1# lead average price, while the remaining smelters experience losses ranging from 0 to 2,200 yuan/mt in lead smelting itself. Similar to previous years, losses in lead smelting are mainly offset by integrated recovery and industry chain extension revenues. Additionally, the high silver prices in 2024 ensure stable refining profits for smelters. Looking ahead to 2025, lead smelting is expected to remain focused on the integrated recovery of silver, copper, zinc, and other rare metals. Although there is an anticipated increase in lead-zinc resource investments, the growth in multi-metal resources is relatively limited. Pricing adjustments for some scarce resources with high content are also expected, potentially further widening the TC quotation differences for different types of lead ore. Due to differences in raw material structures and the degree of industry chain extension, profitability among primary lead smelters varies significantly, with polarization becoming more pronounced.
