Fate of EU lead smelters in the balance as energy crisis bites, BESB learns

Fate of EU lead smelters in the balance as energy crisis bites, BESB learns

Fate of EU lead smelters in the balance as energy crisis bites, BESB learns 1000 563 Batteries International

November 3, 2022: Four European lead smelters are being placed under review for potential temporary closure as the region grapples with the combined economic and energy crisis fuelled by the Russia-Ukraine war, BESB has learned.

Mining giant Glencore is believed to be reviewing the immediate future of its Portovesme subsidiary’s lead smelting and refining operations in Italy, against the backdrop of escalating energy costs in the country — although the company has declined to comment.

It is also understood that upcoming planned maintenance activities at Portovesme, in Sardinia, are being delayed until the review into the sustainability of operations is concluded.

Meanwhile, it is understood that Ecobat has also put smelters in Austria and Germany under review — after BESB revealed on September 29 that Ecobat was going ahead with the suspension of lead production at its plants in Italy, effective October 1, in the wake of “extreme energy prices and other excessively burdensome costs” in the country.

CRU’s lead market analyst Neil Hawkes told BESB that Italy was feeling the impact of the wider European energy squeeze on margins more than most.

He said this was demonstrated by the fact that Ecobat had idled its two secondary lead smelters in Italy (pictured below) before anywhere else.

Hawkes said the difficulties hurting the lead sector were a key topic of discussion during LME Week — the annual gathering of the global metals community in London that ended on October 28.

However, he said while a cloud hangs over how much European lead demand might slow next year, the demand downside “will be limited by the recession-resilient replacement automotive lead battery sector”.

“While the margin squeeze is real and applicable to all and not just four smelters in this region, it should be noted that these ‘reviews’ to cut more lead production in Europe all came ahead of LME Week, which typically marks the starting gun for 2023 lead contract negotiations to begin in earnest,” Hawkes said.

“The threat of more smelter cuts will hang over these talks, with lead producers waiting to see how much of an increase they can secure in next year’s contract premia before taking any action.”

Germany’s Stolberg smelter, which Trafigura is acquiring from Ecobat, is also yet to restart as Trafigura awaits the completion of formalities and final approval from EU authorities.

Hawkes said he thought that Glencore would wait until later this year before making any decision on whether to temporarily halt operations at Portovesme.

“During LME Week we heard that the lead line at Portovesme was still running,” he said.

“Due to Glencore idling the primary zinc smelter at Portovesme since the start of this year, we think refined lead production has slipped from just over 40,000 tonnes last year to just under 40,000 tonnes this year, as it has lost some interconnected feed from the primary zinc smelter.”

But Portovesme is still operating a secondary zinc line, which produces an estimated 50,000 tonnes of secondary zinc annually.

“If Portovesme were to shut, it would only serve to further constrain European production and keep this regional lead market tight,” Hawkes said.

In a third quarter production report published on October 28, Glencore said overall group lead production of 116,800 tonnes was 31,100 tonnes (21%) down on the comparable 2021 period.

The declines in lead — and zinc — production reflected “increasingly complex logistics and supply chains due to secondary impacts of the Russia-Ukraine war”, Glencore said.

Glencore said its Nordenham zinc smelter in Germany would be placed on care and maintenance from November 1 and “reviewed periodically having regard to the economic environment”.

However, the group’s Nordenham lead smelter remains operational.

Main image: Ecobat