November 7, 2019: China’s lead battery makers scaled back their manufacturing operations for a third consecutive week, the Shanghai Metals Market reported on November 1.
The SMM says the scale-back has been caused by slower demand for electric bike batteries, and referred to its own survey across lead battery producers in Jiangsu, Zhejiang, Jiangxi, Hubei and Hebei provinces, where production levels were down 0.58% from the previous week.
“Producers of electric bike batteries in Jiangsu and Jiangxi moved down a gear to avoid any inventory build-up, as orders from distributors shrank significantly on the back of falling lead prices and poor demand from end-users,” said the SMM.
Automotive battery producers also operated cautiously in light of modest downstream demand and exports disruption amid Nigeria’s border closure, which the government has put in place until at least January 31 in a bid to tackle rice and other goods smuggling.
The SMM report was published after the price reporting and intelligence service Fastmarkets said China would become a net exporter of refined lead in 2020 as a result of higher forecast production and unimproved domestic consumption next year.
Fastmarkets said senior analyst Zhiwei Zhang told the 2019 Lead & Zinc Week in Kunming on October 17 that Chinese lead smelters were likely to increase production to take advantage of good profits for lead smelting due to higher treatment charges for lead concentrates and sufficient supply for recycled lead batteries.
“We see a fall in Chinese lead mine output next year, not least because there’s environmental pressure on the sector, but also because treatment charges are heading north, which will disincentivize miners,” said principal lead analyst with Wood Mackenzie Farid Ahmed.
“This will be essentially balanced out by increased concentrate imports to leave Chinese primary production a little down on this year but with secondary production a little higher. Consumption is slightly up, so overall there is no massive change from 2019 to 2020 in the supply-demand situation we forecast for the moment.
“However, if treatment charges continue to increase and Chinese smelters can treat more concentrates without bursting through their limits, then there is a possibility that more concentrates will be imported and refined lead exported, as it won’t be needed domestically. At the moment, the LME-SHFE arbitrage is getting more negative, so there is a driver to export spare refined lead if it can earn more outside China.
“One can foresee, though, that the Chinese authorities will not be keen on increasing refined lead output if it’s just for export and would pose some sort of limits to kill this off.”