On the one hand, recently, as the lead price has been fluctuating downward, the enthusiasm of downstream buyers has recovered somewhat, and the lead ingot inventory has shown a trend of decline; on the other hand, the tight supply situation in the raw material sector is difficult to improve substantially, which will restrict the production of smelters.

Since mid-November, the supply of lead ingots has gradually recovered, and the high lead price has suppressed downstream procurement, leading to a decline in lead prices from the highs. Subsequently, with the increase in refinery maintenance and the continuous drawdown of inventories, the fundamentals of Shanghai lead have improved, and lead prices have gradually stopped falling and stabilized.

Lead concentrate supply continues to be tight.

Since the beginning of this year, the market for lead concentrate has been in a state of tight supply, and the processing fee has fallen to an absolute low level. Since the fourth quarter, domestic smelters have started to prepare for the winter reserve early, although the loss of importing lead concentrate has narrowed, the import window has not fully opened. The spot source of the import mineral trade market is still tight, the signing process of the long-term contract is delayed, and the smelters are generally cautious and observe.

In terms of domestic mines, affected by the successive increase in silver prices, some smelters reported that the spot resources of lead concentrates in the current market have been basically sold out, market quotations are scarce, and the processing fees have been operating at a low level. However, with the successive arrival of previous long-term import contracts, the raw material demand gaps of some smelters have been alleviated, and they have suspended their lead concentrate procurement plans, resulting in a situation of double decline in supply and demand in the spot market for lead concentrates. In December, with smelters completing their winter reserve stocks ahead of schedule, the processing fees in northern regions have gradually stopped falling and stabilized. However, smelters in regions such as Yunnan and Hunan are still purchasing raw materials by reducing processing fees. In addition, lead-zinc mine projects in regions such as Xinjiang, Tibet, and Inner Mongolia entered the winter production reduction and maintenance stage successively in mid-to-late November. The supply at the mine end will remain tight, and there is little room for an increase in processing fees in the short term.

Holding merchants are more willing to ship goods

On the one hand, several domestic recycled lead smelters have transformed into a "lead concentrate + waste lead-acid batteries" multi-feed production model. According to SMM's research data, after the transformation, the dependence on waste lead-acid battery raw materials has dropped from 95% to 20%. Waste lead-acid battery holders are concerned that the weakening demand will lead to a price decline, and the pace of source turnover has returned to normal. On the other hand, lead prices have been falling recently, and smelters have synchronously reduced the purchase quotes for waste lead-acid batteries, and holders have been selling off their goods in a concentrated manner due to the fear of a price decline. Under the influence of both factors, the price of waste lead-acid batteries has fallen in line with lead prices, and the support from the cost side has weakened. However, the overall production situation of smelters is good, and the demand for waste lead-acid batteries is still strong, even though the willingness of holders to ship goods has increased, the market supply of recyclable goods is still relatively tight.

In terms of primary lead, despite the processing fee has been continuously adjusted to the absolute low level, the prices of by-products such as sulfuric acid and silver continue to rise, and the overall profit of smelters is still considerable. Recently, due to the routine overhaul of some medium and large-scale smelters, the supply of primary lead has slightly declined. Regarding secondary lead, with the improvement of raw material arrival situation, the production rate of secondary lead has rebounded to around 50%. Last week, a smelter in Anhui suspended production due to the expiration and renewal of the dangerous waste operation permit, which led to a phased decline in the overall production rate of the industry. If the raw material arrival remains stable and there is no sudden factor such as environmental control to disturb, it is expected that the production rate of secondary lead smelters will maintain stable operation.

Restocking in the downstream sector when prices are low

From the perspective of the terminal market, the market prosperity of electric bicycle batteries has gradually declined. Dealers' purchasing attitudes have become more cautious, and the overall production enthusiasm of enterprises is relatively low. On the other hand, the automotive battery market has entered the replacement peak season. Coupled with the fact that medium and large - sized enterprises have started their year - end routine replenishment, the operating rate of production enterprises has rebounded to some extent. Analyzing from the transaction level, some enterprises in both the primary lead and recycled lead sectors have newly suspended production, and the supply of scattered orders in the market has continued to be tight. Although the operating rate of recycled lead smelters has significantly recovered, enterprises mainly focus on delivering long - term orders placed earlier. The supply of scattered - order resources is limited, and it is difficult to effectively accumulate inventory at the finished - product end. Some enterprises have suspended the shipment of refined recycled lead or shipped at a premium, which has also led downstream enterprises to shift their purchasing preferences to primary lead. Recently, as the lead price has fluctuated downward, the purchasing enthusiasm of downstream enterprises has somewhat recovered, and the inventory of lead ingots has shown a downward trend.

Looking ahead to the future market, the original lead smelting plants have entered the maintenance and production reduction stage, the production of delivery brands has declined, and the supply is showing a regional tightening pattern; in the field of recycled lead, although the support from the cost side has eased, the operation rate is expected to remain stable under the premise of stable raw material arrivals and no sudden factors such as environmental control; on the demand side, as the lead price stops falling and stabilizes, the market's wait-and-see mentality has eased, and the demand for essential inventory has increased, the short-term lead price has gained some support from the bottom. In addition, considering that the supply-tight pattern on the raw material side is difficult to improve substantially, it will restrict the smelting plant's operation rate, and the downward space for lead prices is relatively limited. Operationally, it is worth considering to test the long position lightly at the bottom. We need to continue to pay attention to the impact of the arrival situation on the smelting plant's operation rate.

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