Asian Metal: Thank you very much for taking the time to participate in this interview with me. Lead ingot prices continue to linger at low levels this year, so the operating rates of Chinese lead smelters have declined with some traders’ lead ingot sales volume also dropping. In such a market situation, how is your company faring right now?

Ye: Our company’s lead ingot sales volume was around 30,000t per month in the first half of 2015, a little bit lower than in the same period of 2014. The lead ingot market was very active during June and July of 2014, but the market has been very sluggish in the past two months. Impacted by the hot weather, some battery producers halted or reduced production, so the demand for lead ingots was very sluggish on the Chinese market.

Asian Metal: According to Asian Metal’s statistics, some lead smelters’ lead ingot inventories began increasing in mid-June, indicating an increase in output and weak demand. However, the lead ingot inventories were very low on the Shanghai spot market. What do you think about this?

Ye：Demand for lead ingots has been really weak on the Chinese market recently. As for the low lead ingot inventories on the Shanghai market, many lead acid battery producers which were once located in Zhejiang and Jiangsu provinces began rebuilding plants in the western or central regions of China, due to the stricter environmental protection inspections in eastern China. Therefore, most traders or suppliers delivered lead ingots directly to the battery producers in the western or central regions of China, instead of delivering the metal to Shanghai-based warehouses as before, due to the lower transport costs. Given such a situation, the lead ingot inventories in Shanghai-based warehouses have remained at a low level this year.

However, the lead ingot inventories in Guangdong are very high with many lead smelters in Hunan province delivering the metal to Guangdong-based warehouses, due to the short transportation distance. Meanwhile, as there has been a large premium for lead futures on the SHFE over the lead ingot prices on the spot market, the smelters have been very active in selling the metal to the SHFE warehouses in Guangdong during the past few months. However, we have seen discounts of around RMB300-400/t for lead futures on the SHFE compared with lead ingots on the spot market during July, so the sales volume on the physical market has increased.

The change in the formulation for lead alloys is good news for lead consumption this year. Around 50% of lead acid battery polar plate producers have begun producing rare earth-lead alloys instead of lead-calcium alloys, and the former will extend the usage life for lead acid batteries. The rare earth-lead alloys must be produced from primary lead ingots, which contain lower impurities, so the demand for primary lead ingots is expected to increase.

Asian Metal: Have these kinds of lead alloys been used widely on the Chinese market?

Ye: As the formula for the rare earth-lead alloys is controlled by a few producers, the output of these alloys hasn’t increased sharply yet. However, it will help to support primary lead ingot prices.

Asian Metal: Operating rates at primary lead smelters were very low in China during the first half of this year, but smelters began increasing the rates from late June. According to Asian Metal’s statistics, China’s primary lead output in August will reach the highest level in 2015. Do you think the increase in lead ingots will drag lead prices down?

Ye: Lead ingot output in Henan province has increased a lot during June and July. Yuteng and Jingui in Hunan provinces both resumed production in July, so lead ingot output in Hunan province is expected to increase in August. Additionally, the lead smelting production capacity also grew in Hunan province and three new small-scale lead producers started operations there. Lead smelters in Yunnan province will increase their output from July. Therefore, lead ingot output may increase significantly on the Chinese market in August. However, I don’t think lead prices will drop sharply at that time, as the bullish season for lead consumption will be upon us during August and October and Tianneng and Chaowei may stop the “price war”.

Asian Metal: What do you think the impact on the lead market would be if the major battery producers stopped the “price war”?

Ye: Tianneng and Chaowei are the two largest deep-cycle lead acid battery producers in China, and both want to gain more market share. The two companies have merged many small-scale lead acid battery plants. They may have finished the task of increasing market share in the near term and this will prompt an increase in profits. The end of the price war will be profitable for the lead ingot market, as the market may become more reasonable and stable.

Asian Metal: If the major battery producers end their intense competition, is there any chance small-scale lead acid battery producers will resume production?

Ye: I think there will be almost no opportunity for small-scale battery producers. Impacted by the strict environmental protection inspections in China, many smaller plants were forbidden from operating and they don’t have sufficient finances to upgrade their facilities.

Asian Metal: Lead ingot prices recovered in mid-July but the market remains weak right now. What do you think about the market outlook?

Ye: The easing of the Greek debt crisis and recovery of the Chinese stock market have boosted base metal prices. However, demand for lead ingots remains sluggish on the Chinese market. The trading has been very slow on both the futures and the physical market. Lead ingot prices seem to lack the momentum to bounce back in the near term. Lead smelters have been active in selling the metal, even though the prices were low.

Asian Metal: We think that when lead ingot prices are in the range of RMB13,000-14,000/t on the Chinese spot market, it will be profitable for mining, smelters and battery producers.

Ye: Yes, the current lead prices are acceptable for both buyers and consumers. The lead ingot market is stable and there will be limited room for lead prices to rise or decline in the near term. I predict that lead consumption may increase gradually from late August, pushing up lead ingot prices slightly. The highest point for lead ingot prices may be around RMB14,500/t this year.

Asian Metal: Thank you very much, once again, for sharing your opinions.