SHANGHAI, Mar. 17 (SMM) -- Recently, the news that is spreading around the market is that lead producers in Yunnan province have halted or reduced production due to drought-driven power shortages. SMM made a survey about it and revealed the following insights.
According to the survey, Yunnan province has started to restrict electricity supply from earlier 2010 due to serious drought, and output at local lead producers experienced declines by different degrees. One person familiar with the matter said the worsening drought and production stoppages at more and more small-size lead producers resulted in stronger unwillingness to move goods in the market. Supply of lead from Yunnan province in the Shanghai market was tight, and lead-acid battery producers also reported low selling interest from lead producers. However, some market players said it is a traditional low water level period in Yunnan province, and so local producers should have their measures to deal with the condition, such as thermal power. Even if operating rates at local lead producers are negatively affected by electricity restriction, it should not be an exception this year.
SMM believes production cuts at lead producers in Yunnan province from drought will be more serious than previous years. However, the condition of ample supply in domestic lead market now remains unchanged. Compared with power restriction, SMM believes the biggest problem facing Chinese lead producers is still supply tightness of lead concentrate.
(Edited by SMM)