China's 2019 lead demand seen edging down to 5.08 mil mt on lack of growth

China's refined lead demand is forecast at 5.08 million mt in 2019, edging down from an estimated 5.1 million this year, due to a lack of growth impetus, Jiangxi Copper Corp said in its 2019 lead sector report Thursday.

It attributed the lack of upward momentum to the government raising its 7.5% preferential tax on low emission cars to 10% from January 1 this year, which has cut lead demand from the auto sector. The projected slow recovery in the country's economy was also unlikely to spur an increase in lead demand from the auto sector, Jiangxi Copper said. The producer said China's introduction of new standards for electric bikes, capping maximum speed at 25 km/h and weight at 55 kg, would also cut Chinese lead demand by around 18,600 mt in 2019.

It said the regulatory moves to encourage lighter lead acid storage battery weight and lithium batteries replacing lead acid storage batteries could further cut lead demand in the longer term.

Chinese analysts echoed the weaker demand outlook.

Guangzhou-based Chinese brokerage Huatai Futures said in its 2019 lead report that the downstream storage battery sector did not have strong growth potential, with the electric bike sector's lead demand seen entering a weak phase. It said government constraints on electric bike speeds were expected to cap output and lithium batteries to erode lead acid storage battery share.

China's refined lead supply is seen at 5 million mt in 2019, up from 4.96 million mt this year, with the deficit narrowing to 70,000 mt from 140,000 mt in 2018, according to Jiangxi Copper.

The producer said tightening environment controls had already prompted some Chinese lead smelters to cut output. It noted the commissioning of a total 750,000 mt/year of new recycled lead capacity in 2018 and another 1 million mt/year under construction may on paper indicate a looming lead surplus in China, but tight scrap supply and rising costs have already resulted in run rates at smelters falling below 60%.

Jiangxi Copper forecast China's spot refined lead price to average Yuan 18,700/mt ($2712) in 2019, down 2.1% from Yuan 19,100/mt this year.

China's mined lead demand in 2019 is forecast to edge up to 3 million mt from an estimated 2.97 million mt this year, Jiangxi Copper said, noting that some lead smelters have used lead paste as feedstock, lowering reliance on concentrates, amid increasingly stringent environment protection controls.

Jiangxi Copper forecast China's 2019 mined lead supply at 2.25 million mt, edging up from an estimated 2.23 million mt this year, with the deficit widening to 750,000 mt in 2019 from an estimated 740,000 mt in 2018.