As February Draws to a Close, Which Secondary Lead Smelters Are Preparing to Resume Production? [SMM Analysis]

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SMM, February 20:

As the Chinese New Year atmosphere fades, trading in the lead industry chain has become active.

Downstream battery producers reported that due to weak consumption, the batteries purchased by dealers before the holiday have been consumed at a limited pace. As a result, the current willingness to purchase finished batteries is low. Some dealers still have approximately 1.5 months of finished battery inventory pending sale. Under such circumstances, the decline in in-plant inventory at battery producers has been slow. The lack of new battery orders has directly led to sluggish demand for lead ingots by these producers.

Yesterday, market rumors suggested that a major lead-acid battery producer has expectations for production cuts. Bulls exited the market due to fear of price declines, leading to a significant drop in SHFE lead prices. Following the price drop, market sentiment turned cautious, with most downstream enterprises adopting a wait-and-see approach and some restocking on a just-needed basis at lower prices.

On the supply side of lead ingots, due to the price drop, suppliers narrowed their discounts, especially for secondary refined lead, where the discount against the SMM 1# lead average price narrowed from 150-100 yuan/mt to 50-0 yuan/mt. On the raw material side, stores and scrap battery recyclers sold off due to fear of further price declines, improving raw material arrivals at secondary lead smelters. Some enterprises reported an increase in vehicles queuing for unloading, leading to a surge in in-plant raw material inventory. Meanwhile, procurement prices for scrap batteries were reduced by 50-100 yuan/mt.

During this morning's session, the most-traded SHFE lead 2504 contract rebounded from below 17,000 yuan/mt to around 17,200 yuan/mt. It is understood that the main reason for the increase in long positions is the expectation of concentrated resumption of production at secondary lead smelters from late February to early March. The surge in demand for scrap batteries by secondary lead smelters is expected to push scrap battery prices higher, providing cost support and limiting the downside room for lead prices.

Additionally, the third session of the 14th National Committee of the Chinese People's Political Consultative Conference will be held in Beijing on March 4, 2025, and the third session of the 14th National People's Congress will be held in Beijing on March 5, 2025. The convening of the Two Sessions typically boosts market confidence, particularly in terms of macroeconomic policies. If the Two Sessions signal support for the real economy and industrial development, the lead industry, as a fundamental materials sector, may benefit. Influenced by this historical pattern, bullish funds hold a certain level of confidence in lead prices.

In summary, the market remains optimistic about the short-term trend of lead prices. SMM stated that in March, attention should be paid to the impact of lead ingot supply on lead prices, especially as the concentrated resumption of production at secondary lead smelters will inevitably increase the supply of circulating goods in the market. If downstream lead-acid battery consumption does not show significant improvement, it may weigh on lead price trends.