* Mild winter causing shortage of battery supplies
* Secondary smelters' margins squeezed by soaring raw
* Junk prices up near all-time peaks
By Chris Kelly
NEW YORK, April 5 Secondary lead smelters are
paying near record prices for junk batteries, their raw material
feed, because drivers are not replacing their car batteries due
to the unseasonably warmer winter in the Northern Hemisphere.
The price rise has been driven by a scarcity of spent
batteries, used to make 90 percent of the United States' lead
output. Lead-acid batteries in cars and trucks are lasting
longer due to the milder weather.
Battery demand tends to pick up in the colder months when
batteries, which account for nearly 80 percent of lead demand,
typically seize up from winter's chill.
That in turn increases supply of used batteries, which are
drained, cleaned and returned to the secondary smelters which
use them to make lead.
But this year's temperate winter has curbed that replacement
demand, and with it, the amount of batteries feeding back into
the supply chain. This is forcing secondary smelters to fork out
ever-higher prices to secure raw material.
"As recyclers, we depend on the seasons to generate the
product that we need," one battery recycler said.
"This year we are seeing such a slack in the number of
batteries coming through the salvage end that it is absolutely
devastating to the industry. It's driving the price up to where
nobody is going to make any money on it at all."
Secondary producers' profit margins are being squeezed as
they struggle to pass on the higher costs to their customers in
the automotive industry.
"They can hardly afford to run their smelters right now,"
said the battery recycler.
"They are trying to pass on these costs with premiums, but
right now none of them are operating at 100 percent capacity. If
you're not operating at 100 percent capacity, you're not making
Junk batteries were quoted in a range of 40 to 45 cents per
lb this week, their priciest levels since 2009 when
weather-related demand growth helped power prices into record
territory in the mid to upper 40-cent range, market participants
This compares with around 35 cents a year ago, according to
a scrap dealer.
"Everyone wants to keep their smelters running full steam,
so in order to do that they are paying higher prices than they
should be. Junks are pushing some all-time high levels just in
the last 30 days ... we're in the 40 to 45 cent range, picked
up," one battery maker said.
The scrap dealer said he was shipping lead-acid batteries at
42.5 cents, but at a lower load rate compared with prior years.
"There was a time when I was doing ten loads a week. Now I
am doing three loads a week ... to Exide, RSR Corp. and Newalta
up in Canada. They are buying like crazy," he said.
According to the most-recent data from the Battery Council
International (BCI), North American shipments of replacement
automotive batteries fell 11.17 percent in January from
December, and slid 10.78 percent from January 2011.
"Right now the market is just slow, and one of the reasons
it is slow is because the replacement batteries are not being
replaced," said a physical lead trader.
But just as the warmer winter weather has created a shortage
of battery supplies at the start of the year, a hotter summer
could swing the market back into a surplus just as fast, he
"If all of a sudden we get into July and its 110 degrees
from Texas through Illinois, we're going to get replacement
batteries out the whazoo," he said, expecting a hotter summer to
pull secondary prices back down below the 40-cent level.
Some 90 percent of the 1.296 million tonnes of lead output
in the United States is made from secondary feed, according to
the International Lead and Zinc Study Group (ILZSG).
Doe Run operates the only primary smelter in Herculaneum,
Missouri, which is down for repairs until May following a fire
(Reporting By Chris Kelly; Editing by David Gregorio)