In 2024, lead concentrate supply was tight, processing fees hit a record low, and battery scrap prices exceeded 10,000 yuan consecutively. The supply tightness led to large-scale production cuts and suspensions at secondary lead smelters. Domestic lead prices fluctuated at highs, and the traditional off- and peak-seasons for downstream demand were "disrupted." These unusual developments made 2024 another best-performing year for lead prices since 2017. On July 18, 2024, lead prices surged to a high of 20,050 yuan/mt, the highest since July 2018. However, prices later pulled back, and by December 31, 2024, the most-traded SHFE lead contract closed at 16,765 yuan/mt, up 5.71% year-on-year.
In the spot market, according to SMM spot quotes, the SMM 1# lead ingot spot price also peaked at 19,775 yuan/mt on July 18, 2024. By December 31, 2024, the average spot price of SMM 1# lead ingot was 16,725 yuan/mt, up 1,100 yuan/mt or 7.04% from the year-end price of 15,625 yuan/mt in 2023.
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Looking back at the lead price trends over the past year, they can be roughly divided into the following phases:
In H1, the supply-demand imbalance for domestic refined lead raw materials intensified, while the global production growth of lead-zinc projects was slow. The tight supply of lead concentrates and battery scrap once drove lead concentrate processing fees to a record low, while battery scrap prices hit a three-year high...
According to historical SMM prices, on July 26, 2024, the average domestic lead concentrate processing fee dropped to 550 yuan/mt (metal content), a record low. Meanwhile, the price of scrap EV batteries surged to 12,125 yuan/mt on July 22, 2024, marking a three-year high. At the same time, the production of domestic primary lead and secondary refined lead declined significantly, with annual production plans revised downward. The refined lead supply in the Chinese market shifted from surplus to supply-demand balance.
From Q2 to Q3 2024, the tight raw material supply and the anticipation of "trade-in" consumption boosted market optimism, leading to a significant rise in domestic lead prices. Battery prices also increased during the off-season. Specifically, in Q3 2024, the most-traded SHFE lead contract peaked at 20,050 yuan/mt, while SMM 1# lead and SMM 2# lead reached annual highs of 19,775 yuan/mt and 19,725 yuan/mt, respectively.
However, it is worth noting that the strong performance of Chinese lead prices was not mirrored in overseas markets, resulting in a domestic market outperforms overseas market pattern. This made refined lead imports profitable. The influx of refined lead and secondary crude lead imports impacted the domestic spot market, while the price advantage of Chinese lead-acid batteries in international markets weakened. This led to a reduction in export orders for some enterprises, slowing production activities and pressuring SMM 1# lead prices to pull back in Q3.
In Q4, supported by a series of favorable macro policies, lead prices stabilized and fluctuated rangebound in October. The fundamentals showed a dual increase in supply and demand, with downstream lead-acid battery enterprises seeing improved orders and gradually recovering operating rates. After the National Day holiday, just-in-time procurement slightly rebounded. In November, the lead market continued to show a dual increase in supply and demand. Phase-specific smog-induced production restrictions, coupled with sustained downstream demand improvement, drove domestic lead prices to fluctuate upward. In December, frequent environmental protection events in domestic supply regions, such as production cuts and transportation restrictions in Henan, Anhui, and Hunan, tightened lead ingot supply. SHFE lead prices climbed to 17,910 yuan/mt, a one-and-a-half-month high. However, in late December, as the market's enthusiasm for trading supply-side environmental production cuts waned and downstream enterprises reduced procurement for year-end inventory checks, lead prices gradually gave back the gains from earlier in the month. Despite the pullback in H2, the strong rally in H1 ensured that the most-traded SHFE lead contract still recorded an annual increase in 2024.
Breaking it down by segment:
Primary Lead:
According to an SMM survey, the cumulative primary lead production in 2024 declined by 2.11% YoY. This was mainly due to the fundamental imbalance between limited lead concentrate supply and excess capacity at the ingot end. The tight supply of lead concentrates drove processing fees to historically low negative levels in 2024, reducing overall profitability in the lead smelting industry. Lead products became marginalized in the production configuration of smelting enterprises, even being treated as "by-products."
On July 26, 2024, the average domestic lead concentrate processing fee dropped to 550 yuan/mt (metal content), a record low. Meanwhile, the lowest imported lead concentrate processing fee fell to -$50/dmt on the same day, also marking a record low for negative processing fees.
Secondary Lead:
According to an SMM survey, the cumulative production of secondary refined lead in 2024 fell by 20.82% YoY, a significant decline. Entering 2024, the increasingly severe tight supply of lead concentrates and battery scrap caused the overall operating rate of domestic secondary lead enterprises to drop significantly compared to 2023. By late March 2024, the weekly operating rate of domestic secondary lead enterprises climbed to an annual high of 56.66%, mainly due to the upward shift in lead price centers at the time, while battery scrap prices did not rise significantly and even saw several small declines. This allowed secondary lead smelters to restore profitability, boosting production enthusiasm and driving operating rates higher. However, in April, coinciding with the off-season for lead-acid battery consumption, the low demand for battery scrap replacement and limited scrap volumes led to tight battery scrap supply. Battery scrap prices began to rise, and battery scrap recyclers held back sales in anticipation of higher prices. Many secondary lead smelters saw significant declines in raw material inventories, even leading to production cuts. The insufficient supply of battery scrap continued to constrain the growth of operating rates at secondary lead enterprises.
The persistent raw material shortage impacted the ingot end. In July, many secondary lead production areas in Anhui were in a state of production cuts, while some delivery brand enterprises in Henan underwent maintenance. The lead ingot supply issue was difficult to resolve in the short term, pushing lead prices higher. On July 18, SMM 1# lead prices reached a high of 19,850 yuan/mt, a six-year peak. At this time, battery scrap had become a shared raw material for both secondary lead and some primary lead smelters. Amid tight lead concentrate supply, primary lead smelters relied on lead paste from dismantled battery scrap as a major raw material supplement.
In Q4, some secondary lead smelters experienced severe production cuts or suspensions in October due to environmental protection-related controls or equipment failures. Production gradually recovered in November, and lead prices fluctuated at highs. Coupled with the limited increase in battery scrap prices in early November, secondary lead enterprises saw significant profitability recovery. Smelters ramped up production enthusiasm, leading to a notable increase in secondary lead production in November. The operating rate of secondary lead enterprises recovered to 53.94% in the first week of December, the highest since April. However, the good times did not last long. In December, frequent heavy pollution weather orange alerts were issued in many regions, particularly in Anhui, Henan, and Shandong. Secondary lead smelters in these areas were significantly affected by environmental protection-related controls. As a major secondary lead production area, Anhui saw frequent production cuts and suspensions during the month. In Henan and Jiangsu, vehicle transportation was restricted, affecting raw material arrivals. In Shandong, smelters faced delays in ramping up production after resuming operations due to environmental protection-related controls. Against this backdrop, the operating rate of secondary lead enterprises fell to 27.88%, nearing the low levels seen during the large-scale maintenance and production suspensions in June.
Inventory:
According to SMM data, the social inventory of lead ingots across five regions fluctuated significantly in 2024, hitting a low of 15,800 mt on August 29 and a high of 85,000 mt on November 18. By December 30, 2024, the total social inventory of lead ingots across five regions was 53,100 mt, down 16,700 mt or 23.93% from the year-end level of 69,800 mt in 2023.
The low inventory in August was mainly due to maintenance at some primary lead smelters in Henan and Hunan in mid-to-late August, reducing lead ingot supply and causing social inventory to decline continuously. On August 29, social inventory fell to 15,800 mt, the lowest since June 2020. In September, social inventory gradually increased. Lead prices fluctuated downward in September, and suppliers had differing attitudes toward shipments. Some sold off amid fears of price drops, while others held back sales at low prices or waited for delivery warehouse transfers. Smelters gradually transferred in-plant inventory to delivery warehouses, leading to a significant increase in social inventory. During the Mid-Autumn Festival, most lead smelters continued production, while downstream enterprises generally took 1-2 days off, resulting in a temporary absence of lead consumption and a continued rise in social inventory. During the National Day holiday in October, primary lead smelters mostly maintained normal production, while some secondary lead enterprises took holidays. Downstream lead-acid battery enterprises generally took 1-7 days off, leading to a temporary absence of lead consumption. After the holiday, social inventory increased as expected. In November, lead prices remained high, and downstream buyers were cautious due to high prices. After delivery, suppliers transferred inventory to delivery warehouses, pushing social inventory to the highest level since April. In December, amid frequent smog and environmental protection inspections, lead ingot supply tightened. Additionally, downstream enterprises began year-end inventory checks in late December, leading to a dual decline in supply and demand in the lead market and an overall destocking trend in social inventory.
Downstream Lead-Acid Battery Segment:
According to an SMM survey, overall, the operating rate of the downstream lead-acid battery segment in 2024 slightly outperformed 2023, especially in Q2 and Q3. Traditionally, March-May is the off-season for lead-acid battery consumption, while Q3 typically sees a peak season due to factors such as the back-to-school season and agricultural activities, driving demand for battery replacements in electric bicycles and three-wheelers. Lead-acid battery production plans are generally based on seasonal consumption patterns.
However, in Q2 2024, lead prices climbed continuously, reaching a six-year high. The price surge prompted dealers to rush to buy amid continuous price rise and stockpile, leading to active production by lead-acid battery enterprises. Operating rates in Q2 were significantly higher than in previous years. In Q3, lead prices quickly pulled back, almost erasing the gains from Q2. Enterprises and dealers generally adopted a wait-and-see attitude. Dealers, in particular, were in a destocking phase in Q3, as the battery inventory purchased in Q2 had not been fully digested. Production enterprises also saw a sharp decline in orders, dragging down operating rates.
In Q4, lead prices stabilized, and the impact of price volatility on the lead-acid battery market diminished. Meanwhile, the deadline for trade-in subsidies for electric bicycles and automobiles was mostly set for December 2024. The trade-in policy, combined with seasonal consumption improvement, boosted the operating rates of lead-acid battery enterprises, bringing them back to normal levels.
Overall, in 2024, the tight supply of lead concentrates and battery scrap drove strong lead price increases. Policies such as the frequently emphasized "trade-in" also supported consumption to some extent. Overall, lead prices saw a significant upward shift in their center, supported by strong fundamentals.
Outlook for 2025:
SMM expects that in 2025-2026, the supply side will see a continued tug-of-war between new lead ingot capacity and smelting profits, while lead consumption will face mixed expectations of increases and decreases. Domestic lead consumption in China will continue to rely on policy support, while the loss of export advantages may lead to a steady decline in consumption. Additionally, there will still be opportunities for lead ingot imports in 2025, and a slight surplus may emerge at the ingot end. Lead price volatility in 2025 is expected to narrow compared to the sharp fluctuations in 2024.
Returning to the present, the impact of air pollution on lead smelters continues in January. Combined with declining secondary lead profits, smelters are less motivated to produce. More enterprises are undergoing maintenance in January, and some plan to take breaks during the Chinese New Year, which may further widen the decline in lead ingot production. On the consumption side, with the arrival of the Chinese New Year, lead-acid battery enterprises are expected to take breaks as usual, which may significantly weaken lead consumption in January.At the same time, attention also needs to be paid to the expected stocking demand for lead ingots by downstream enterprises before the Chinese New Year.
