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Economic Observer reporter Pu Zhenyu "I can give you about 9 yuan for 1 kilogram. Of course, it depends on the specific type of battery." On August 1, Xiao Zhang, who recycles used lead-acid batteries in Beijing, told the Economic Observer that the current recycling price has nearly doubled compared with the same period last year.

The high prosperity of the recycling market of used lead-acid batteries is closely related to the trend of lead prices. It is understood that the use of lead is relatively concentrated, and nearly 90% is used to manufacture lead-acid batteries. Compared with lithium batteries, lead-acid batteries have low energy density and short life, but they also have the advantages of low cost and high safety.

Since late February this year, the price of lead futures has been rising overall, from a low of less than 16,000 yuan per ton to more than 19,000 yuan per ton in July, a record high in nearly six years. "Due to the cost transmission of the lead price increase, the production cost of lead-acid batteries has also increased, resulting in a continuous price increase for new batteries this year," Zhao Fei, an analyst at Zhuochuang Information, told the Economic Observer.

On July 22, Tianneng Group, a leading battery manufacturer, issued a notice stating that due to the continued rise in raw material prices, the ex-factory prices of all series of Tianneng brand batteries will be raised again. On July 23, Chaowei Power also issued a notice stating that the price of lead has repeatedly hit historical highs, which has in turn exacerbated the continued rise in battery production costs, and product prices will be raised.

Recently, as the prices of two-wheeled electric vehicles from brands such as Yadea, Aima, and Tailing have been raised, more and more second- and third-tier small brands have followed suit, with many two-wheeled electric vehicles rising by hundreds of yuan. Unlike two-wheeled electric vehicles, three-wheeled electric vehicles, which use more steel, have offset each other in the case of a continuous decline in steel prices, and the current product prices are relatively stable.

Substitution effect of lithium battery and sodium battery

The driving force behind the rise in lead prices comes from the supply side. Zhuochuang Information told the Economic Observer that since the second quarter of this year, the shortage of raw materials has led to the passive production cuts of refineries, the supply of lead ingots has continued to be tight, the fundamentals are bullish, and bullish forces have actively entered the market, strongly pushing up lead prices.

According to Zhuochuang Information data, in the first half of the year, the overall operating rate of the domestic lead industry was slightly lower than last year, and the overall supply of lead ingots was reduced. The initial value of the total domestic refined lead output was about 2.9627 million tons, a year-on-year decrease of 169,000 tons, a decrease of 5.4%.

A significant difference between the lead industry chain and copper, aluminum, zinc, etc. is that the proportion of recycled lead is very high, which is basically equivalent to the output scale of primary lead. In the first half of the year, the initial value of primary lead production was 1.568 million tons, a year-on-year decrease of 3.27%, and the initial value of recycled lead production was 1.3947 million tons, a year-on-year decrease of 7.68%.

The lead recycling chain includes "waste lead recovery - smelting - application". The decline in recycled lead production is due to the insufficient supply of waste lead-acid batteries. The Jinrui Futures Research Institute report believes: "One reason why waste batteries are less this year is that the penetration rate of lithium batteries has increased significantly in recent years, replacing lead-acid batteries, which directly leads to a decrease in the replacement of waste lead-acid batteries."

Public information shows that 41% of my country's lead-acid batteries are used in electric vehicles, 24% are used as car (starting) power supplies, and 10% are used as emergency UPS for communications. As a power source for electric vehicles, lead-acid batteries are mainly used in electric bicycles and electric tricycles, and the lead consumption of the two accounts for 30% and 11% of the total consumption respectively.

In recent years, lithium-powered batteries have not only greatly influenced the new energy vehicle market, but also begun to affect the two-wheeled electric vehicle market. According to data from the Gaogong Industry Research Institute of Lithium Batteries, the global production of lithium-powered two-wheeled vehicles in 2022 will be about 27.35 million, and the lithium battery penetration rate will be 31.4%, accounting for more than 30%.

In addition to lithium batteries, sodium batteries are also an emerging force in the two-wheeled electric vehicle market. In March 2023, Yadea, the leading two-wheeled electric vehicle company, released the sodium-ion battery "Ji Na No. 1" and its supporting vehicle Ji Na S9. Xinri and Aima followed closely and also launched sodium battery two-wheeled vehicles.

Sodium batteries have advantages in energy density over traditional lead-acid batteries and cost advantages over lithium batteries. Yadea previously predicted that sodium batteries, lithium batteries, and lead-acid batteries will coexist and develop in the electric two-wheeled vehicle market in the future, with sodium batteries likely to account for 20-30% of the market share.

In addition, the Jinrui Futures Research Institute report believes that the average replacement cycle of automotive electric starting batteries is three years. Based on this, this year's scrap volume is directly linked to 2021, when production was low due to the epidemic. In particular, new energy vehicles have risen rapidly in the past two years, and these automotive starting batteries have not yet reached the replacement cycle, which has caused a decrease in the current scrap volume of lead-acid batteries.

The interest game on the recycling side heats up

The shortage of used lead-acid batteries is also related to the interest game between various links in the industrial chain. It is understood that used lead-acid batteries are usually purchased from consumers by individual merchants, and then purchased from individual merchants by waste battery recyclers and sold to recycled lead refineries. Since the profits of individual merchants come from the price difference of recycling and the time difference benefits brought by hoarding, facing the rising lead prices, many individual merchants began to be reluctant to sell, which aggravated the contradiction between supply and demand.

According to a report from Jinrui Futures Research Institute, waste battery recyclers generally reported that it was difficult to collect waste batteries this year. The annual recycling volume of waste battery recyclers surveyed was roughly between 10,000 tons and 40,000 tons. The recycling volume of enterprises this year generally decreased by 10% to 30%, and the reduction of some enterprises reached 50%.

"Compared with the same period last year, the lead production capacity in Jiangsu, Hunan, Anhui, Yunnan, Shanxi, Guangxi and other regions has increased this year, the contradiction between supply and demand of scrap batteries has intensified, and refineries in various places have actively raised prices to compete for raw materials; the scrap battery market has staged a 'waste appreciation story'." Zhuochuang Information said.

As some individual merchants were reluctant to sell, domestic scrap battery market prices continued to rise since April, reaching a high in the first half of the year on June 27. The tax-inclusive ex-factory price of scrap batteries was 11,590 yuan per ton, an eight-year high. In the first half of the year, the tax-inclusive ex-factory price of scrap batteries nationwide increased by 1,780 yuan per ton, an increase of 18.14%.

It is worth noting that since late July, the price of lead has shown signs of a continuous decline. On July 22, the closing price of Shanghai Lead 2408 on the Shanghai Futures Exchange was 19,650 yuan/ton. On August 2, the closing price of Shanghai Lead 2408 was 185,650 yuan, which was lower than 19,000 yuan.

It is understood that July to August is the peak season for consumers of two-wheeled electric vehicles. Due to the hot weather, many people are unwilling to walk to work and choose to buy electric vehicles. At the same time, as it is summer vacation and graduation season, many students will also consider using electric vehicles during this period.

In this case, will the price of lead continue to fall? Relevant institutions are not optimistic about this. "It is expected that the shortage of scrap batteries will improve slightly with the arrival of the peak consumption season in July and August. In addition, due to the promotion of the reverse invoicing policy and the low amount of scrapped lead-acid batteries this year, the shortage of scrap batteries cannot be eliminated in the short term. We expect that the tight market for raw materials has not ended yet, the cost center of gravity of lead prices will rise, and the high fluctuation of lead prices will continue." Jinrui Futures Research Institute reported.

Zhuochuang Information holds a similar view: "In the second half of the year, the market expects that the tight supply of raw materials will ease slightly. As the output of lead ingots slowly recovers, the market price may return to fundamentals; however, under the background of overcapacity, the shortage of raw materials will still affect the cost side, supporting the high price of lead. It is expected that the mainstream operating range of 1# electrolytic lead in the second half of the year will be between 17,500 and 19,500 yuan/ton, and the price center of gravity will be higher than that in the first half of the year."

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Pu Zhenyu, reporter of Economic Observer

He focuses on automobile industry policies, industry enterprise transformation, etc., pays more attention to domestic brands and mainstream joint venture brands, and is good at analysis and reporting.
Contact Email: [email protected]
WeChat ID: enqingranfang