Lead consumption is difficult to improve, the supply is up, and high inventories are still unresolved

Author: Zheng Qiongxiang
In July, the domestic lead supply and demand pattern continued to weaken, and consumption began to slightly improve seasonally. However, the start of secondary lead production accelerated to resume its upward trend, and the start of primary lead production rose steadily. The domestic lead ingot inventory continued to rise and exceeded the 170,000 tons mark. Under the pattern of weak inside and strong outside, the export window is about to open, but the actual export is still limited.
Domestic consumption began to slightly improve seasonally
But the room for improvement is hard to be optimistic
It was not until late July that domestic battery consumption began to show a small seasonal improvement, mainly reflected in the moderate increase in the demand for electric bicycle replacement. At the same time, some dealers have shifted from passive backup to active backup, and the pressure on high finished product inventory of electric bicycle battery companies has been eased. The improvement in car battery consumption is even more lagging. In addition, heavy rains in many parts of Henan in July, domestic demand for replacement of two-wheelers and car batteries is expected to increase.
In terms of battery exports, according to the data of the General Administration of Customs, the export volume of lead-acid batteries in June was 17.19 million. The year-on-year growth rate in the same month increased again to 14.1%, which was also an increase of 25.8% from June 2019; the cumulative export volume from January to June 91 million, a cumulative year-on-year increase of 25.8%. As battery export conditions continue to improve from July to August, it is highly certain that the overseas economy will improve and recover, and battery exports will maintain a growth trend from July to August.
The high temperature and heavy rain weather this summer is outstanding, and the domestic battery consumption in August is in the cycle of the traditional consumption peak season, superimposed battery exports are expected to continue to improve, and it is expected that consumption will continue to improve in August this year. However, due to the deepening impact of the replacement of lithium batteries and the relatively high inventory of finished lead-acid batteries, the room for improvement in domestic lead-acid battery consumption may not be optimistically expected.
Lead ore supply continues to be tight
The supply of lead ore continues to tighten and the situation remains unchanged. According to SMM data, the lead ore inventory level of the smelter fell slightly to below 20 days in June, maintaining at a historically low level. In July, the production of domestic smelters returned, and the demand for raw materials increased. It is expected that the raw material inventory of smelters will hardly increase in July.
From June to July, the domestic lead ore output was limited month-on-month. In addition to the loss of imported ore, the import supplement was insufficient. In June, the import volume of lead ore was only 922,000 tons, which fell by 4.97% and 12.46% respectively. ; At the same time, the smelter started to rise steadily, so the supply of lead ore was tight in June. From July to August, the supply and demand pattern of lead ore continued the above trend, therefore, the supply of lead ore will continue to be tight. The domestic lead ore processing fee is further reduced. According to SMM data, the monthly processing fee for domestic self-produced lead ore continued to drop by 100 yuan/ton to 1,000 to 1,300 yuan/ton in August, and the monthly processing fee for imported lead ore remained flat at a low level of 40 to 60 US dollars/dry ton.
Primary lead starts stable and has an upward trend and does not change
The domestic lead ore supply is tight, and there are slight restrictions on the security of primary lead. Lead ore processing fees are at a low level, but the by-product silver price fluctuates at a high level, and the price of sulfuric acid has rebounded significantly, supporting smelting profits. Since June, the start of primary lead production has shown a steady upward trend. Some smelters have finished their overhauls and production has resumed. At the same time, Yunnan’s electricity and production restrictions were lifted in mid-to-late June. Therefore, the recovery of primary lead output in June exceeded the impact of maintenance. Volume, output both rebounded and increased month-on-month and year-on-year.
In July, some smelters including Chifeng Shanjin further resumed production. In addition, the impact of power curtailment increased again in July. However, only Mengzi in Yunnan stopped production due to insufficient mineral materials, and other smelters maintained normal production; power curtailment had a short-term small impact on Henan refinery production. In addition, the heavy rain weather did not affect the Henan smelter’s production, mainly due to the obstruction of transportation. Therefore, the primary lead smelting output in July rebounded slightly from the previous month.
In August, it is necessary to pay attention to the possible restrictions on the start of primary lead by the power cut, and the impact is currently expected to be relatively mild. In general, the steady rise in primary lead production in August may continue.
Small export of lead ingots in July
Exports in August may still be difficult to increase
Under the pattern of strong internal and external fundamentals, the ratio of internal and external lead prices dropped significantly in July and remained at a low level. The lead export window is about to open, and a small amount of lead ingots were exported in July. The market pays more attention to exports. However, due to objective conditions such as difficulty in export logistics, the actual export outflow is limited. It is expected that exports will still be restricted in August. Therefore, the pressure of high domestic supply and high inventory may be difficult to pass through export channels. Alleviated.
The domestic high inventory situation is still unsolved
Low overseas inventory triggers squeeze
The domestic lead supply and demand pattern continues to weaken, the supply release increases, and consumption improvement is still limited; the superimposed spot continues to discount, and the holders are more willing to deliver; and the delivery inventory of the Shanghai Futures Exchange is cooperating with the expansion, so the domestic lead ingot inventory in July includes the Shanghai Futures Exchange. The inventory of warehouse receipts continues to rise. At the end of July, the domestic lead ingot inventory has further exceeded 170,000 tons.
In August, despite the further expansion of the Shanghai Futures Exchange’s delivery warehouses may slow down and domestic consumption will slightly improve, the high supply situation will not change, and the superimposed export outflow may continue to be restricted. It is expected that domestic lead ingot inventories will continue to accumulate or remain at a high level. situation.
On the overseas side, consumption is improving, and the German refinery has stopped production due to force majeure. In July, overseas inventories continued to deplete, and LME lead inventories continued to drop to a low level. In the context of low inventory, LME lead also repeatedly squeezed its positions in July, and the LME lead futures price turned to a strong book structure in the near-monthly end. In August, there is a strong certainty that overseas consumption will continue to improve. Therefore, overseas consumption will maintain a low inventory pattern.

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