Lead Smelters' Silver Processing Trade Profits Considerable; Lead Smelters' Silver By-product Output Surges YoY [SMM Analysis]

According to an SMM survey, with the technological upgrades and comprehensive recycling capacity expansion at lead smelters, the demand for silver-containing lead concentrate and crude lead has increased. Meanwhile, the import volume of silver concentrate and silver ore sand in the form of processing trade has steadily increased. From January to April 2024, the output of silver by-products at domestic lead smelters increased by 198 mt YoY, a growth rate of over 7% compared to the same period last year.

As domestic silver prices are lower than overseas prices, silver refined from lead concentrate imported through general trade can only be sold domestically. In contrast, silver produced from silver concentrate imported through processing trade can be exported overseas, effectively addressing the negative price spread of silver in imported lead concentrate. Therefore, lead smelters often require a silver content of over 2,500 kg when purchasing silver-containing lead concentrate and import it in the form of silver processing trade to reduce procurement costs. This is a key reason for the substantial increase in silver concentrate imports in recent years.

Regarding the pricing of silver-containing lead smelting raw materials, domestic silver-lead ore with a silver content of over 1.5 kg/t has always been a scarce resource. In H1 2024, with a tight supply of lead concentrate, sellers slightly increased the silver coefficient and lowered the silver refining charges for imported ore. However, according to SMM's estimate of the by-product revenue of primary lead smelters, the considerable profits brought by rising silver prices have significantly boosted the production enthusiasm of lead smelters. From January to April 2024, the output of silver by-products at domestic lead smelters recorded positive growth. In May, the import window for lead ore briefly opened, which may continue to boost the enthusiasm for silver processing trade at lead smelters. The output of silver at lead smelters in H1 2024 may increase by nearly 10%.