Operating rate across China’s secondary lead smelters rose slower than expected in July as thin margins eroded producers’ enthusiasm. Rates fell even as the central government eased environmental restrictions, a survey found.
The operating rate gained 2.8 percentage points from June and stood at 51.1 % in July. This is 10.3 percentage points lower than the same period last year. Smelters produced 137,200 mt of secondary lead last month, up 7,900 mt from June.
Profit margins began to narrow last month as operations at secondary lead smelters recovered from the end of the month-long environmental reviews. A slower drop in battery scrap prices, compared with that of lead, also accounted for the thinner profits.
We expect output and the overall operating rate to remain little changed this month from July as environmental restrictions ease and certified smelters resume normal operations.
However, the operating rate of uncertified, small smelters in Henan, Hebei, Jiangxi, and Yunnan provinces would fall in August. Poor margins and losses drove most of these producers to suspend, we learned.
As of Tuesday August 14, average margins fell below 100 yuan/mt, from 300-400 yuan/mt in mid-July, we learned. These compared with highs of 800-1,000 yuan/mt at the end of June.