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China's Lead Demand Growth Slower Than Expected, Antaike Says
Aug 27, 2010 10:25CST

SHANGHAI, Aug. 26 -- Lead demand growth in China, the world's largest consumer, may be weaker than expected this year as the economy cools and slowing auto sales cut demand for the metal used in batteries, a state-affiliated researcher said.

Consumption increased by 6.8 percent in the first half of this year to 1.78 million metric tons, compared with 16.5 percent growth in 2009, Hu Yongda, an analyst at Beijing Antaike Information Development Co., said in a phone interview today.

Usage will grow 8.3 percent to 3.61 million tons this year, Antaike said, compared with an earlier forecast for 10 percent expansion. Vehicle sales in China, the world's biggest market, are likely to climb 17 percent to a record 16 million this year, compared with a 46 percent surge in 2009, according to the China Association of Automobile Manufacturers.

"We didn't expect demand growth to be so slow," said Hu. "It's mainly because auto sales were much slower than last year," he said.

Domestic prices may not extend this year's decline because production is expected to expand at an even weaker pace than demand, Antaike said. Output, including recycled lead, will climb 4.8 percent to 3.7 million tons, Hu said. Expensive ore curbed production of primary lead, while sluggish demand affected output of recycled metal, he said.

Limited supply growth "will partially offset the impact of sluggish demand," supporting domestic prices at more than 14,300 yuan ($2,103) a ton, Hu said. Immediate-delivery lead traded on Changjiang, Shanghai's biggest spot nonferrous metals market, at around 16,050 yuan a ton yesterday.

Auto Sales

Lead for three-month delivery on the London Metal Exchange has slumped 17 percent this year, and traded at $2,015 a ton at 4:43 p.m. Shanghai time, rallying from six days of losses.

"A drop of 10 percentage points is surprising to me, but given that auto sales slowed from more than 40 percent, it is understandable," said Heng Kun, an analyst at Essence Securities Co., referring to the first-half consumption figure.

China's passenger-car sales to dealerships climbed 13.6 percent from the previous month in July, the slowest pace since March 2009, as consumer sentiment weakened, according to the automobile association. Inventory of unsold vehicles is also growing, it said.

Barclays Capital said in a report on April 23 that Chinese lead demand may expand 13 percent to 15 percent this year, outpacing domestic supply and causing the nation to become a net importer toward the end of the year.

China's refined lead imports from January through July dropped 92 percent to 10,847 tons, while exports increased 4.5 percent to 12,668 tons, according to the customs office.


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