Primary Lead New Capacity Expansion Slows Down, 2024 Production May Record Negative Growth? [SMM Analysis]

Reviewing 2020-2023, the primary lead smelting industry underwent technological innovations such as raw material structure optimization, crude lead technical transformation, and comprehensive recovery efficiency improvement. The capacity expansion projects of primary lead smelters have been steadily operating. From January to September 2024, SMM primary lead production declined by 4.51% YoY, down 124,800 mt compared to the same period in 2023. Although the new capacity from a technical transformation project in Qinghai resumed operation in Q4, it could not reach full production due to factors such as raw material supply and unstable trial production. SMM expects that the cumulative YoY for primary lead in 2024 will still record negative growth.

In 2022, primary lead production declined due to factors such as crude lead technical transformation, by-product profit decline, and pandemic control measures, but gradually recovered in 2023. The production of primary lead smelters also reached a peak. Due to the continued low TCs for mined lead, the increase in primary lead production after technical transformation mainly came from the metal content increment brought by non-mined lead. At that time, the new capacity mainly included the expansion of primary lead production lines in Henan and the stable operation of lead smelting projects in Hunan, focusing on the comprehensive recovery of lead, silver, tin, and antimony. In 2023, after the completion of technical transformations in lead smelters, the available lead-containing raw materials expanded, lead metal recovery rates improved, and profits from precious and rare metals and by-products increased, leading to rapid production growth. Compared to the progress of primary lead capacity expansion, the construction of global lead concentrate and silver-lead mine projects lagged, resulting in a supply shortage of lead concentrate and crude lead in many regions. From H2 2023 to H1 2024, extreme long-distance transportation "mine grabbing" and firm quotes for battery scrap occurred frequently, causing a decline in the proportion of mined lead in primary lead raw materials. It was not until Q3 2024, when SHFE lead outperformed LME lead, that the import of lead concentrate and crude lead into China cooled the heated raw material market.

According to SMM survey, in 2023, the capacity expansion of primary lead reached over 500,000 mt, but the actual operating rate was constrained by raw materials, with a small amount of new capacity not operating normally due to capital turnover or other reasons. In 2024, SMM survey found that the expansion rate of primary lead capacity significantly slowed down, with only 100,000 mt in metal content of new projects. A smelter told SMM, "In the current cycle, domestic capacity is already slightly surplus. Expanding primary lead capacity in 2024 is like investing in real estate to build buildings, which is not a wise move." Additionally, with the improvement of precious and rare metal recovery technology and profit growth, the positioning of lead metal has changed. Lead smelters no longer consider high-grade lead ore as the main procurement raw material. The TC quotes for silver-lead ore may still have limited rebound, and the progress of copper-lead-zinc polymetallic projects and the supply of silver-lead ore are closely watched. Although traditional primary lead smelters in Guangxi, Yunnan, Jiangxi, and Inner Mongolia do not expect crude lead technical transformations, they also mention the principle of prioritizing comprehensive recovery. More and more lead smelters no longer use lead metal production alone as an assessment indicator, and the short-term supply of refined lead may find it difficult to maintain a growth trend.