China threatens to slam brakes on price of lead

Leo Lewis, Asia Business Correspondent

After a surge of more than 125 per cent, the price of lead ends the year in limbo — its future at the mercy of Chinese bureaucracy, the stroke of a pen and the legal status of 100 million electric bicycles.
The cycles in question, known as “e-bikes”, are battery-enhanced machines that are the darlings of the modern, urban Chinese. More than 20 million were sold this year, putting a vast army of commuters, unable to afford cars or motorcycles — and without licences — on the roads at a sedate maximum speed of 12 km/h (7½ mph).
If the rules stay as they are, analysts say, e-bike sales may rise to 25 million next year. If they change, as seems possible, the ramifications will stretch far beyond the streets of Shanghai, Beijing, Wuhan and Guangzhou.
Crucially, more than 90 per cent of e-bikes use a lead-acid battery — and, with each one needing about 12kg (26lb 7oz) of lead, China’s cyclists represent more than 6 per cent of global demand for the metal. If the Chinese are allowed to continue to own e-bikes without a licence, according to analysts at CLSA, the Asia-based brokerage, the price of lead may continue to rise. If rules are tightened severely, commodity traders in Hong Kong think that much of the speculative “froth” that has been driving up lead may vanish.

The Chinese have embraced the machines more vigorously than any other nation. Even without government “green” subsidies of the sort used to push e-bikes in Europe, 80 per cent of the world’s electric bicycles were sold to Chinese commuters. Ecological concerns have little to do with their decision. E-bikes outsell cars in China by a ratio of two-to-one for reasons of economy. A standard e-bike, costing 1,700 yuan (£155) and used as an alternative to a daily commute by bus, pays for itself in 100 days. Competition between China’s 1,000 licensed e-bike makers is likely to keep prices down.
The e-bikes are also easier to negotiate through China’s huge traffic jams. This month, the four millionth private car hit the roads of Beijing. In every big Chinese city, the roads are clogged to a standstill as the highway infrastructure bends under the strain.
Recent talks in Beijing over the status of the larger e-bikes have loomed over the industry just as its golden era seemed to be approaching. Citing accidents and the use of silent e-bikes as an ideal stealth vehicle for bag-snatchers, the Government said that it might re-classify some as motorcycles. That, manufacturers argued, would make them too expensive for many consumers and make millions of existing users criminals because they do not hold driving licences.
Ten days ago Beijing’s State Standardisation Authority seemed to back down, postponing the new classification, which would have gone into force this Friday, but industry insiders think that the delay could prove to be short-lived. Local reports suggest that many e-bike makers, wary of the industry’s future, are planning to shed workers.