SHANGHAI, Feb. 8 (SMM) --
A recent survey of 25 domestic lead smelters (total capacity: 2.41 million mt) revealed the following insights:
1) Operating Rates Edge Down
According to the survey, overall operating rates at major domestic lead smelters were 70.71% in January, down slightly from 72.85% reported December 2009. Supplies of natural gas, coal and electricity at lead producers were limited during January due to severe winter weather, causing operating rates to fall. Wild price fluctuations in energy and raw materials exerted strong cost pressures on small and medium-size producers, where even more rapid declines in operating rates were reported.
2) Expanding Views on Market Trade
In late January, LME lead prices hit their lowest level since August 2009 and after falling for nine consecutive days to USD 1,950/mt, and downstream producers believed prices would weaken even further, with prices expected to fall as low as RMB 12,000/mt. Some lead producers were still eager to sell goods to generating cash, while others were reluctant to move goods with prices below RMB 16,000/mt in view of production costs.
3) Optimistic Outlook for 1Q
Domestic lead prices were volatile during January and early February, with price changes over one three-day trading period as much as RMB 1,000/mt. However, 70% of lead producers surveyed remain optimistic towards domestic lead prices in 1Q. They also believe that the Central Government will not take any further action in the short term after raising the bank reserve requirement earlier in the year.
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