Since December 22, 2023, the price of the most active SHFE lead contract has been rising all the way. As of January 3, the most active SHFE lead contract has successfully recorded a 8-day winning streak. As of January 3, the contract increased by 0.19% to 15,980 yuan/mt, and its closing price increased by 2% compared with the closing price of 15,665 yuan/mt on December 22.
SMM1# lead ingots have also been on the rise since late December 2023. As of January 3, 2024, the spot quotations of SMM1# lead ingots have risen to 15,650~15,800 yuan/mt. The average price was reported at 15,725 yuan/mt, an increase of 250 yuan/mt, or 1.62%, compared with the low of 15,475 yuan/mt on December 13, 2023.
As for the reasons for the recent rise in lead prices, SMM believes that it is mainly driven by the tightening supply of primary lead and secondary lead and the resumption of downstream procurement after New Year's Day. According to SMM research, from late December to now, the lead market has experienced frequent production cuts and shutdowns. Some smelters in Henan Province slightly reduced production due to haze weather. Subsequently, primary lead smelters in Yunnan, Hunan and other places also entered maintenance, resulting in a significant tightening of the supply of primary lead ingots.
In terms of secondary lead, Anhui, the largest producer of secondary lead, issued a heavy pollution weather warning, tightening the already tight secondary lead supply. Anhui issued a heavy pollution alert, and shutdowns occurred at more secondary lead smelters, lowering the regional operating rate by 17.74 percentage points; sample companies in Henan and Jiangsu were also slightly affected. That, combined with the tight supply of raw materials, lowered the operating rates; smelters in Inner Mongolia reported low output due to price and raw material issues despite the absence of environmental protection impact.
After returning from the New Year's Day holiday, the impact of production restrictions on secondary lead companies in Anhui did not yet end, and production was expected to resume as soon as January 4. According to SMM, due to factors such as tight supply of battery scrap, losses, and year-end closures, the secondary lead smelters in Anhui had already reduced and suspended production; therefore, the impact of this environmental control was relatively limited, and SMM expects the supply of secondary refined lead to decrease by approximately 2,800 mt/day.
But there is no doubt that the recent supply disturbances in the primary lead and secondary lead sectors have indeed significantly tightened the supply of lead ingots, and the supply of goods circulating in the market is still limited, boosting lead prices.
In addition, cost support from raw materials such as battery scrap is still there. Since December 13, 2023, the quotations of waste electric vehicle batteries once again entered an upward channel. As of January 3, 2024, the spot quotations of waste electric vehicle batteries rose to 9,750~9,900 yuan/mt, with the average price quoted at 9,825 yuan/mt, an increase of 300 yuan/mt or 3.15% compared to the low of 9,525 yuan/mt on December 13, 2023.
In terms of downstream consumption, at the beginning of the new year, downstream lead-acid battery companies that were closed due to the New Year's Day holiday gradually resumed normal procurement. According to the latest data from SMM on January 2, the social inventory of lead ingots in SMM's five markets totaled 67,600 mt, a decrease of 2,200 mt compared with December 29, 2023, and a decrease of 3,200 mt compared with December 25, 2023.
Overall, the current lead supply is falling and demand in increasing, providing strong upward momentum for lead prices. SMM predicts that lead prices may remain high in the short term. We need to pay attention to the delivery of the SHFE front-month contract in the middle of the month, as inventory fluctuations may have a certain impact on lead prices.
