SMM Pb Survey: Marked Declines in Operating Rates at Domestic Primary Lead Producers

SHANGHAI, Mar. 8 (SMM) – A recent SMM survey of 35 major domestic primary lead producers (total capacity: 2.77 million mt/yr) revealed the following insights: 

1)  Significant Declines in Operating Rates
Chinese New Year holiday for 2010 fell in mid-February, and output in January and February is traditionally lower compared to other months of the year.  Some small and medium-size producers usually conduct unit maintenance in February in view of the fewer number of working days in that month.  In addition, LME lead prices fell as much as USD 400/mt before the Chinese New Year holiday, pushing domestic lead prices down into the RMB 15,200-16,000/mt range, which also depressed downstream operating rates.  According to the survey, overall operating rates at domestic primary lead producers in February fell around 4% from January levels, but were in line with SMM predictions.

2) Supply Tightness of Raw Material Intensifies
Supply of lead concentrate was limited after Chinese New Year holiday, since winter is not strong production season for regions such as Inner Mongolia. More importantly, no improvement has reported in domestic lead markets since early 2010, and mine operators are waiting instead for prices to return to RMB 17,000/mt before selling goods, resulting in  shortages of domestic lead concentrate and pushing up prices.   Since the current  domestic/LME lead price ratio is not favorable for imports, trading sentiment for imported lead concentrate was thin.  In this context, domestic primary lead producers were suffering from shortages of raw materials, which will directly affect output of lead ingot in early March. 

 

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