SHANGHAI Jul. 18 (CBI China)--Last Wednesday, China's 13 lead and zinc smelters participated in the conference held by the China Non-ferrous Metals Industry Association (CNIA). Officials from the National Development and Reform Commission (NDRC) and Ministry of Commerce of China also presented in the meeting. Participants discussed production, management, and development trends in the lead and zinc industry, as well as measures to promote lead and zinc concentrate imports, but avoided the topic of joint production cuts. The attendees did reach a consensus with CNIA on the following points.
First, CNIA should organize smelters to hold a conference every six months, hosted by different enterprises each time. More frequent meetings will help strengthen industry self-discipline, and avoid unproductive competition among enterprises.
Second, the Central Government should control investment in fixed assets in lead and zinc industry, and promote admittance standards to avoid inefficient capacity expansion. All enterprises should put the industry policy into practice, regulate investment behavior, promote energy conservation and emission reductions, and enhance comprehensive utilization levels.
Third, the Central Government should support zinc and lead concentrate imports, and encourage domestic smelters to sign contracts with overseas suppliers of raw materials. The Central Government should give a transition period to smelters with long-term contracts whenever export taxes are adjusted.
Fourth, the Central Government should enact technical barriers to low-end products, in order to restrict imports of low-end lead and zinc smelting products.
Fifth, according to attendees at the meeting, transactions in lead and zinc spot markets were brisk, and inventories of major lead and zinc products were low. However, many smelters shut down units for maintenance ahead of schedules due to weak prices. Production cuts and intentional delays in starting up new projects helped keep prices stable.
Sixth, the Central Government should improve the national strategic reserve system, in order to relieve contradictions between supply and demand.
Before the meeting, market players believed the conference would also focus on production cutbacks, since a joint production cut was discussed during the July 12th meeting in Shanghai. China's major lead and zinc smelters, traders, and a small number of mine operators attended that the 12 July meeting discussed current market conditions facing the enterprises and measures to solve the problem. Approximately 60 enterprises took part in the meeting, mainly smelters and domestic traders. Most zinc smelters at the meeting have capacity of 50-200kt/yr, and lead smelters present have capacity of 100kt/yr, while Henan YuGuang Gold & Lead Group, also at the meeting, has primary lead capacity of 300kt/yr.
Although a small number of attendees expressed intention to cut productions, no specific timetable was available, and the proposal failed to get support from all smelters. CBI believed some lead and zinc smelters had suffered losses over the past two months due to weak prices. However, there was still little possibility for all domestic lead and zinc smelters to collaborate in cutting output, since most zinc and lead smelters were enjoying profits now due to current high prices.
In fact, most smelters present at the July 12th meeting were not running at full operating rates, and no smelters have taken measures to cut output to date, so the meeting generated little attention in domestic markets. SHFE zinc prices also failed to rise, and domestic lead prices rose from July 11th, but mainly due to tightening supply caused by production cuts from power supply shortages at smelters in Henan province.