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SMM Pb Survey: Operating Rates at Smaller Lead Producers Improve Significantly
Aug 16, 2010 11:56CST

SHANGHAI, Aug. 16 (SMM) – A recent SMM survey of 35 domestic primary lead producers (total capacity: 2.77 million mt) revealed the following insights:

1) Operating Rates at Smaller Producers Improve Significantly
According to the SMM survey, the average operating rate at the 35 primary lead producers was 72.87% in July, up from June levels.  SMM expects China’s primary lead output will be around 240 kt in July.  Operating rates at smaller lead producers with capacity below 50 kt improved significantly.  After resuming production in June, output at Shaanxi Dongling Group returned to normal.  Production at Yunnan Tin Group increased with new capacity resulting from technical improvements.  
2) Tight Raw Materials, Higher Costs
Lead producers in the survey told SMM that supply of lead concentrate remains tight and is causing difficulties in securing goods.  Although China’s lead concentrate output is rising, falling imports of lead concentrate is negating the increase in domestic lead concentrate, leaving raw materials in short supply, and one reason behind the low TC of domestic lead concentrate.  As lead producers normally import goods when LME lead prices are stable and not during periods of price fluctuations, costs at lead producers have not fallen significantly.    
3) Mixed Views Toward Outlook
Domestic lead producer held mixed opinions regarding rapid price gains in the LME lead market since late July, especially whether or not domestic lead prices will effectively break through the resistance level of RMB 16,000/mt.  Larger lead producers are largely optimistic and have stable orders.  However, some producers say supply will increase if prices advance further, believing the possibility of price declines is greater than price increases.  As a whole, domestic lead producers are optimistic over prices during 3Q and 4Q.  


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