The economic slowdown of 2008/9 and the resulting sharp drop in Western car production hit lead-acid battery makers severely worldwide. Only in China did lead-acid battery makers continue to thrive as car production barely registered a pause, while e-bikes have continued to enjoy phenomenal growth. Auto production has made a recovery, but is still way down on levels seen in the middle of the last decade; meanwhile sales have been supported to some extent by the replacement market as older vehicles have been extended.
China’s environmental ministry ordered tight controls of lead-acid battery units and recyclers following reports of poisoning incidents in Zhejiang and Guangdong provinces. The legal representative of Zhejiang Haijiu Battery Co. was detained on May 16 after more than 300 people near a plant were found to have elevated levels of lead in their blood, Bloomberg reported, and eight officials from the local government, the environmental protection bureau and the health bureau are being investigated as lax supervision has also been blamed for the poisonings, according to reports in the paper. Lead-acid battery plants in Zhejiang, Guangdong, Sichuan and Henan provinces have suspended production for about two weeks, representing up to 80 percent of the country’s capacity.
Battery production accounts for about 70 percent of China’s domestic lead consumption, estimated at about 4.1 million tons in 2011. The industry has repeatedly been the subject of environmental concerns in recent years. If Beijing’s actions are to be taken as a serious attempt to clean up the levels of pollution to the local environment, then estimates that three quarters of plants could be phased out within the next 2-3 years would have a serious impact on China’s lead demand.
Zeng Jian- jun, vice general secretary of the China Lead-acid Battery Association, is reported in Reuters as saying that within 3 years the current number of battery plants (about 2,000) could be reduced to 400-500. Followed through, that could theoretically result in the loss of 75 percent of 4 million tons of demand, or a 3 million-ton-per-year drop. Of course, it won’t come to that — plants may be closed, but newer, more environmentally sound ones will take their place. In the meantime however, the temporary drop in lead demand is expected to impact lead prices in coming months and the closures, even if only temporary, will impact the supply of lead-acid batteries for export.
Falling Chinese lead demand should result in lower lead prices in Q3/Q4; and lower battery supplies from China, a major supplier to world markets, would result in increased demand for Western and Japanese producers to fulfill. China’s EPA may be engineering the twin benefit of cleaning up the country’s environment and boosting the fortunes, if only for a while, of Western battery makers enjoying increased demand and reduced raw material costs.