Since October 27, 2024, due to unfavorable meteorological conditions, large-scale moderate to heavy pollution weather has occurred in parts of Hebei, Henan, and Shandong. It is expected that in the coming week, under the influence of northerly airflow, Anhui province will experience a round of moderate to heavy pollution, reaching the provincial orange warning activation conditions stipulated in the "Anhui Province Heavy Pollution Weather Emergency Plan." After research by the Provincial Ecological Environment Protection Committee Office and approval by the provincial government officials, it was decided to issue a provincial orange warning for heavy pollution weather, starting the provincial level II response at 20:00 on October 31. The warning covers seven prefecture-level cities: Huaibei, Bozhou, Suzhou, Bengbu, Fuyang, Huainan, and Lu'an. (Source: https://mp.weixin.qq.com/s/2OiF8yUsm44yJMbh0KScIg)
As the weather turns colder, pollution weather becomes more frequent, and we have received similar provincial orange warnings for heavy pollution weather from multiple regions. The market is highly concerned about the news of production reductions or shutdowns at secondary lead smelters due to environmental protection controls. Therefore, SMM has tracked and reported this information.
In mid-October, due to environmental protection-related controls in Hebei, the production of small smelters slightly declined, and a large local smelter has stopped production and is currently in the furnace drying stage, expected to produce lead by November 5.
In mid-to-late October, heavy pollution weather warnings were issued in Henan, leading to a decline in battery scrap dismantling at local primary lead smelters and production reductions at secondary lead smelters. Enterprises expect the controls to end in early November, allowing production to return to normal.
In late October, an environmental protection inspection team visited Anhui for guidance. A large smelter stopped production due to a combination of market and other factors. On October 31, Anhui issued a provincial orange warning for heavy pollution weather, and on November 1, some smelters indicated expectations of production shutdowns. Other smelters generally stated that they need to monitor weather changes, and if the situation continues to deteriorate, production reductions to cooperate with controls cannot be ruled out.
Some smelters in Jiangsu indicated that the current environmental protection inspection cycle is expected to last from late October to mid-November, and production has not yet been affected. However, they need to observe subsequent weather changes. As heating gradually starts in north China, there is also a probability of heavy pollution weather in Jiangsu, which would inevitably affect production due to environmental protection controls.
Currently, SMM data shows that the weekly operating rate of secondary lead smelters is declining.
Environmental protection controls, declining secondary lead production, and vigilance regarding subsequent weather changes have led to an increase in long positions, which is one of the reasons for the rise in SHFE lead.
However, the current social inventory of lead ingots is still on the rise. With the delivery of the SHFE lead 2411 contract scheduled for November, the transfer of inventory to warehouses by holders will increase the pressure of inventory buildup. We need to be cautious of lead prices jumping initially and then pulling back.
