At the end of the traditional peak season of lead storage enterprises, the operating rate has declined, and the downstream demand of lead battery for electric vehicles and automobile industry has continued to be depressed. The lithium elevator secondary battery in the base station equipment guided by national policies has gradually replaced the lead battery, resulting in a low lead consumption. With the increase of processing cost of primary lead, the output will be released soon, and the supply will be surplus compared with the weak demand.
China’s PMI in November was 50.20, ending six months below the boom and bust line; the US ism manufacturing PMI was 48.10, down slightly; the European manufacturing PMI was 46.90, up slightly; the Japanese manufacturing PMI was 48.90, up slightly on a month on month basis. The outlook for the world economy has not improved significantly.
In October, M2 increased by 8.4% year-on-year, the former value was 8.4%; M1 increased by 3.3% year-on-year, the former value was 3.4%. The difference between M1 and M2 rose slightly on a month on month basis, indicating a slight improvement in investment. In October, RMB loans increased by 1.68 trillion yuan, an increase of 522.2 billion yuan month on month. In October, the total scale of social financing increased by 10.7% year on year, and the growth rate decreased by 0.1% month on month. The level of financing is gradually improving. In October, CPI rose 3.8% year-on-year, with the previous value of 3%; PPI fell 1.6% year-on-year, with the previous value down 1.2%. As pork prices continue to rise, CPI is still likely to rise.
Under the general downward pattern of the global economy, the overall trend of lead price is weak and in an oscillating downward channel.
The increase of processing cost supports the increase of lead ingot smelting
Since the second half of the year, the supply of domestic lead ore has increased and the supply of foreign ore has gradually released. In October 2019, the import volume of domestic lead concentrate was 146000 tons, down 12.9% month on month, up 44.2% year on year; from January to October, the cumulative import volume of lead concentrate was 1354800 tons, up 37.2% year on year. China’s import of lead ore rose sharply.
Since December, the average processing cost of domestic lead concentrate has increased by 150 yuan / ton to 2150 yuan / ton, and the average processing cost of imported lead concentrate has increased by 10 dollars / ton to 115 dollars / dry ton. TC has been at a high level in the past three years, which will increase the profits of the original lead enterprises, stimulate the production of the original lead and support the start-up of the original lead smelting.
On the other hand, due to production losses, the output of recycled lead in the third quarter was lower than expected, but overall, the overall output of recycled lead increased steadily this year. According to the Statistics Bureau, the domestic output of recycled lead in September was 253000 tons, up 52% year on year. From January to September, the cumulative domestic output of recycled lead was 1.761 million tons, up 23.5% year on year. The operating rate of licensed smelters in the three provinces rose 2.8% to 55% on a weekly basis. After the national day, the phased release of environmental protection production restriction reduced the impact of environmental protection policies on lead output, and the supply of renewable lead continued to increase. At present, the profit of recycled lead has risen to a relatively high level of about 1000 yuan / ton, which is expected to further stimulate the growth of the supply of recycled lead.
With the change of supply shortage pattern, the domestic lead price moves down as a whole, and even starts to accumulate inventory. Relevant data shows that the current social inventory level of lead ingots is higher than that of the same period last year.
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Lead demand continues to decline due to low consumption
Environmental policies mainly affect the demand for lead. This year, the peak season of electric vehicle battery consumption is not prosperous, and the off-season of consumption has continued since the fourth quarter, and the output of electric vehicle still maintains a negative growth trend. Battery market orders began to weaken, many enterprises began to tighten production. On April 15, 2019, the “safety technical specifications for electric bicycles” officially implemented led to the “lightweight” of batteries, directly reducing the use of lead. Considering that the light-weight technical transformation of battery enterprises can be basically completed in 2020, it is expected that the lead consumption will continue to drop by 50000 tons.
On the whole, automobile consumption has also declined significantly, and automobile production and sales have continued to shrink for more than one year. According to the data released by China Automobile Industry Association, as of October 2019, the cumulative production of domestic automobiles was 20.444 million units, down 10.4% compared with the same period in 2018, which is the 12th consecutive month in which the cumulative negative year-on-year growth of domestic automobile production. In October, automobile production decreased by 2.10% year-on-year, and last month’s value was 6.90%. Auto sales in October decreased by 4.03% year-on-year, compared with 5.15% last month. The continuous downturn has led to the decline of lead in new car batteries.
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Although the base station equipment has a substantial growth, but the policy guidance makes the lithium elevator secondary battery gradually replace the lead battery, the lead battery fails to grow, and the Chinese tower will not use the lead battery at all in 2020. All of these factors reduce the demand for lead consumption in the downstream.
In general, due to the increase of processing costs and profits, the supply of primary lead and recycled lead is sufficient. However, the downstream demand for lead, such as electric vehicles and automobiles, is not strong. The national policy guides the lithium elevator secondary battery to gradually replace the lead battery. At present, there is no new growth point of lead consumption. The overall supply exceeds the demand, and the focus of lead price moves down step by step
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