Some Battery Producers Propone Output Resumption with Poor Demand, SMM Surveys

Shanghai, Feb. 20 (SMM) – Trading recovered in ignition battery market last week after 2017 Chinese New Year holiday, but end-user market demand was quiet due to warm weather in winter months. Battery inventories at distributors and traders were consumed slowly during the holiday. Inventories at most distributors can be sold for one month and some even can be sold for two months, restraining orders improvement. Some battery producers even thus proponed output resumption.

SMM surveyed 10 ignition battery producers and found that 2 of them restated output during January 31 to February 2, 5 of them resumed operation from February 4-6 and 3 of them reopened from February 11-13. Some producers even had their workers take holidays for more than one month. Operating rates at most battery producers were at 60-80% and those at some producers were only at 20-30%.

SMM attributes factors below behind poor demand in ignition battery market after the holiday.

Lead prices ranged sharply in Q4 2016. Distributors, expecting prices to rise, rushed to build stocks before November 2016 and most increased inventories to 2-3 months. But, lead prices dropped continually since the beginning of December 2016, raising market panic. Distributors thus reduced or even suspended battery purchases from December 2016 to January 2017, resulting in falling orders at battery producers from mid and late December 2016. Those battery producers delivered November’s orders in December. Hence, inventories at battery producers surged.

Besides, replacement demand in ignition battery market was poor due to warm weather in winter months. Distributors sold goods mainly under inventories on hand after 2017 Chinese New Year holiday. Moreover, ignition battery market usually enters off-season in March. Those, together with volatile lead prices, led to uncertainties over battery prices. So, most distributors mainly built small tight-supplied stocks while few distributors built large amounts of stocks.

In addition, demand in other relevant markets was also sluggish due largely to falling vehicle sales. China cut preferential policy on small-engine vehicle’s purchase tax since the beginning of 2017 by raising tax from 5% to 7.5 %. This, combined with 2017 Chinese New Year holiday, reducd auto sales in January 2017. China’s auto production was 2.37 million sets in January 2017, down 22.65% MoM, and sales were 2.52 million sets, down 17.59% MoM. According to China Automobile Dealers Association, monthly vehicle inventory alert index (VIA) was 61.5% in January 2017, up 18.6% MoM, which was much higher than guard line at 50%.

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