Starting from January 14, boosted by the capital construction plan, the main lead contract in Shanghai experienced 4 Lianyang, with the highest price reaching 17810 yuan/ton. From the basic point of view, near the Spring Festival, downstream enterprises have holidays, demand performance tends to be flat, it is difficult to boost lead prices. On the supply side, although the inventory of lead market is still at a low level and the price difference between primary lead and reclaimed refined lead is small, the price of reclaimed lead raw material waste battery keeps falling, resulting in the continuous decline of production cost of reclaimed lead, and the support for lead price gradually weakens. When market sentiment returns to calm, lead prices will return to the fundamentals, showing a weak trend of oscillation.
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Business Startup Rate Continuously Declining
With the approaching of the Spring Festival, downstream enterprises have a holiday one after another, and the start-up rate of lead-acid battery enterprises has declined one after another. According to the survey, the weekly comprehensive start-up rate of lead-acid battery enterprises was 61.5% last week, which was lower than 66% in December 2018. As the Spring Festival approached, some remote areas began to stop logistics, distributors purchased less, and manufacturers finished pre-festival battery storage, and adjusted production line start-up rate one after another, so this week many provinces lead-acid battery enterprises start-up rate generally down. In addition, SMM said that on January 20, some small lead-acid batteries enterprises will begin their holidays one after another, while large and medium-sized enterprises will gradually stop production according to the production process until January 27-31, and lead-acid batteries enterprises around the country will stop production centrally.
From the downstream data, China Automobile Industry Association data show that in December 2018, China’s automobile production was 25234,000, down 17.03%, the same period in 2017 was -0.70%, the same period in 2018 was 16.33 percentage points lower than the same period in 2017.
Waste battery prices continue to fall
Due to poor demand, the current profit level of recycled lead enterprises has fallen. It is estimated that as of January 22, the profit of recycled lead enterprises is 325 yuan/ton, which is lower than the average profit value of 536.25 yuan/ton in December 2018. However, as far as recycled lead used batteries are concerned, the price of waste batteries has been declining since October 2018. As of January 21, the price of Shanghai non-ferrous grid start-up car waste batteries (white shell withholding waste liquid) is 8,600 yuan/ton, which is lower than 9350 yuan/ton in the same period last year. The cost of recycled lead production is 16,000 yuan/ton, which is lower than 17,250 yuan/ton in the same period of 2018.
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If renewable lead enterprises lose money, they will choose to stop production, then the cost of production of renewable lead will support the price of lead. However, due to the continued decline of the old price of waste battery, the cost of renewable lead will decline, so the support of the future lead market is expected to gradually decline.
In addition, according to the survey, due to the end of the year, production and marketing of refineries and the recovery of refinery maintenance, in December 2018, the operating rate of primary smelters increased year-on-year. Data show that in December 2018, the operating rate of primary lead smelters in China was 66.06%, 2.96% higher than that in November, and 6.33% higher than that in November. The start-up rate of primary lead smelters increased year on year, indicating an increase in lead supply. In a word, the decrease of the price of waste battery leads to the decrease of the production cost of recycled lead, and the start-up rate of the original lead smelter increases greatly year-on-year. The supply side of lead market also causes some pressure on the price of lead.
In summary, near the Spring Festival, inventory has rebounded, lead-acid battery business startup rate continues to decline, demand-side performance tends to be flat. On the supply side, lower prices of waste batteries will weaken the cost support of recycled lead, and the increase in the start-up rate of primary lead smelters also indicates an increase in the supply of primary lead in the short term. After the market mood gradually returns to calm, period lead or under the influence of empty fundamentals operates under pressure.
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