Behind the Decline in China's Secondary Lead Operating Rate: The Dual Challenges of High Costs and Market Stagnation【SMM Analysis】

From May 10 to May 16, 2025, the weekly operating rate of SMM secondary lead in four provinces was 37.22%, down by 0.43 percentage points from the previous week.

As shown in the chart above, the weekly operating rate of secondary lead has been on a declining trend since April, with a drop of approximately 30 percentage points. According to SMM, the key factors suppressing enterprises’ production enthusiasm are the tight supply of secondary lead raw materials, which has led to high costs, weak terminal consumption, and poor sales of lead ingots, as well as the losses resulting from the combination of these two factors. The low scrapping volume of spent lead-acid batteries has led to a scarcity of market supplies, putting great pressure on recyclers to collect goods and making them reluctant to deliver.

As a result, secondary lead smelters are facing a tight supply of waste batteries arriving at their plants and low raw material inventory levels, which makes it difficult to lower their purchase quotations. Moreover, the intense competition among secondary lead smelters for raw material purchases has led to a strong wait-and-see attitude among recyclers due to the practice of offering individual price increases to customers. For example, the current mainstream market price for scrap electric batteries, excluding tax, is between 10,050 and 10,100 yuan per ton. A smelter in the East China region said that after quoting a price of 10,050 yuan per ton, it was like “a stone sinking into the sea,” with no response from any recycler. No recycler is willing to offer goods at this price, while some individual recyclers have contacted the smelter to request a price increase of at least 10 yuan per ton. In summary, the tight supply of raw materials is not expected to ease in the short term, and the artificial control of supplies has further exacerbated the situation.

During the week, lead prices remained in a range-bound fluctuation. Downstream battery manufacturers are heavily observing and waiting, primarily relying on long-term orders to meet their production needs, with a low willingness to purchase spot orders of lead ingots. Meanwhile, secondary lead smelting enterprises, facing cost pressures, are reluctant to sell and find it difficult to accept transactions at a significant discount. Amidst the sentiment of "upstream producers not selling and downstream consumers not buying," the trading activity in the spot market for refined secondary lead remains sluggish. Additionally, the poor enthusiasm of downstream customers for purchasing lead has made it difficult for electrolytic lead holders to sell their goods, with some brands of lead even offering small discounts relative to the SMM 1# lead (Primary）average price. Under such market conditions, secondary lead enterprises are forced to offer larger discounts to sell their products, with no profit to speak of. As of May 16, 2025, the theoretical profit and loss value for large-scale secondary lead enterprises was -592 yuan per ton, while for medium and small-scale secondary lead enterprises, it was -820 yuan per ton.

This week, the operating rate of secondary lead continued to decline, while the finished product inventory maintained an upward trend. Since the current sales price of secondary lead is below the cost, once sold, the loss is inevitable. Most enterprises would rather accumulate inventory than sell. Given that the current operating rate of secondary lead is already below 40%, SMM estimates that the finished lead inventory may not continue to increase next week. In addition, the limited supply of waste batteries arriving at the plants makes it difficult to accumulate raw material inventory, compounded by the weak demand for lead ingots from downstream battery manufacturers. The sluggish market has dampened the production enthusiasm of secondary lead smelting enterprises. However, as there are already many enterprises that have reduced or suspended production, the decline in the operating rate in the future may slow down.