Executive Interviews

Asian Metal：Hello Mr. Lian, welcome to the interview by Asian Metal. Please introduce your company first.

Mr. Lian：Thank you for your invitation. Our company was established in 2002 and was acquired by a listed company Guangdong Hongyuan in 2017. Currently, we have obtained operating licenses for processing 100,000 tons of lead-acid batteries and 37,000 tons of lead-containing hazardous waste. The company’s main business are collection, storage, utilization of lead-containing waste, multi-metal mining and smelting waste based production.

Asian Metal：Please introduce the current production situation of Chinese secondary lead market and the future development of Chinese secondary lead industry.

Mr. Lian：According to the statistics of the China Non-Ferrous Metals Association, in 2022, the national secondary lead ingot production capacity reached 2.85 million tons, accounting for 47.9% of the total national lead ingot production capacity. However, I personally believe that the actual secondary lead production capacity should be about 3 million tons, and the proportion should be about 50%. Because some primary lead smelters will sell part of the secondary lead together with electrolytic lead, For instance, a considerable part of the waste lead smelted by our fire process is also supplied to primary lead plants together with lead mines as raw materials. The proportion of secondary lead production capacity is increasing year by year for the following reasons. First, Chinese primary lead producers mainly rely on lead concentrate as the raw material but the profit is meager. The secondary lead producers mainly rely on waste battery recycling to obtain raw materials. According to different operational environments, waste battery scrap recovey cycle is generally 3.5-8 years, this cycle turnover is fast, so the production capacity rises. Given gradual increase of secondary lead production capacity, the biggest impact on the primary lead market is pricing. Secondary lead producers normally set their prices lower than those of primary lead. With the increase of production capacity of the capacity, the producers, in order to compete for market share, would not set their prices high. That is why the prices of other base metals rise or fall obviously in the recent years while those of lead remain relatively stable on the whole. Considering that primary lead production will cause heavy metal pollution during the process of mining and production, the proportion of secondary lead production capacity in the total production capacity of developed countries such as Europe, the United States and Japan is on average more than 80%. Some countries have even achieved 100% secondary lead production. Chinese primary lead producers have to consume lead concentrate containing gold, silver, antimony, tin, copper and other metals to ensure profits but this mode is not sustainable. With the country's restrictions on the exploitation of mineral resources and the importance of environmental protection, the proportion of secondary lead production capacity in China woud keep growing. It is expected that by 2030, the proportion of secondary lead production capacity in China will account for about 60% of the total production capacity.

Asian Metal：What impact will this trend have on the supply of raw materials? Will lead waste be imported in the future?

Mr. Lian：At present, the supply and demand of raw materials remain stable overall. Since secondary lead production is a closed loop from raw material cycling to terminal consumption, the gradual increase in production capacity also means that the supply of raw materials will steadily increase, so the future supply of raw materials will also show a stable state. Lead-containing waste and waste batteries are both hazardous waste, whose customs control level is higher than that of general solid waste. China banned the import of such waste since 2014 , so it is impossible to import toxic waste containing lead in the future.

Asian Metal：In recent years, the government has carried out a series of rectification to govern the chaos of the battery recycling market. What are the current problems in the battery recycling market? How did your company respond to these problems?

Mr. Lian：Because of the low barriers to enter the industry and the phenomenon of disorderly competition, there are a large number of illegal and unqualified "small workshop" -type enterprises in the current market to disrupt the market order, and squeezed the market share of legal enterprises. They have no legitimate qualifications, they do private transactions, malicious bidding, they do not bear responsibilities for product quality problems. As a production company, our voice is not loud enough. What we can do is to improve the recovery rate of other metals in waste batteries in order to reduce our costs and resist the risk of price fluctuations.

Asian Metal：At present, the demand for power batteries and energy storage batteries in China is relatively strong, how do you think about the impact of lithium battery industry on lead-acid battery industry?

Mr. Lian：First of all, the starting power of new energy vehicles still rely on lead-acid batteries; Secondly, electric bicycles are mainly for common consumers, so the prices of lithium carbonate batteries do not have a cost-effective advantage at the moment, so the sales of electric bicycles containing lead-acid batteries will not dramatically decline; Thirdly, lead-acid batteries are currently irreplaceable in the field of large-scale energy storage equipment and data center construction. Because the lead-acid battery can remain stable performance in the temperature from -40-40℃, the applicability is much higher than other batteries. At present, in the northwest region, the government requires 30% of energy storage battery supply per gigawatt-hour in the field of wind power and photovoltaic, and these energy storage batteries are lead-acid batteries. In summary, in the long term, lithium batteries are certainly in a cycle of explosive growth in the next 15 years. But the market share of lead-acid batteries will slowly reduce.

Asian Metal：Since August, the prices of lead has exceeded RMB16,500/t (USD2,253/t), what do you think are the reasons? How do you predict the price trend in September and Q4?

Mr. Lian：The main reasons for the high price of lead are as follows: First, a large amount of capital enters the market, resulting in the high prices. Second, the cost of lead smelting has risen due to the shortage of raw materials, namely, the import lead ore supply maintained tight; For secondary lead ingot, the supply of recycled batteries keep tight this year as a large number of batteries have been replaced at the beginning of this year, resulting in a reduction in the replacement of recycled batteries in the rest of this year, leading to price increase of recycled batteries; Third, the market saw low lead ingot inventories. The highest inventory of lead ingot was up to 240,000t this year, but after June, the inventory fluctuated at the low level of 30,000-50,000t. In the third quarter, the prices of lead ingot will fluctuate between RMB17,000-18,000/t (USD2,321-2,458/t) and would probably fall in the fourth quarter as the smelters' operating rates will increase following the increased prices, the tight supply will be eased. The downstream demand of lead ingot in Q4 would maintain stable with no significant improvement.

Asian Metal：Please talk about the company's development plan for this year.

Mr. Lian：In fact, the survival of our enterprise is relatively difficult this year. At present, the national economy is in a recovery period. For the secondary lead production industry, only Guangdong Province in the country does not have a tax rebate policy (40% corporate income tax), so we could not enjoy this favorable subsidy. Therefore, in this case, we can only produce according to the off-peak season. Secondly, making good use of the license of 37,000 tons of lead waste to do multi-metal recycling is the way to secure profits. Thirdly, we plan to upgrade our production technology to increase production, dilute costs, and increase our competitive advantage in the province. The project has been applied for and approved by the local government, and the renovation can be carried out when the funds are in place.

Asian Metal：Thanks for your sharing, with you good luck.

Mr. Lian：Thank you.