SHANGHAI, Dec. 15 (SMM) --
A recent SMM survey of 36 major domestic lead producers (total capacity: 3.16 million mt/yr) in November revealed the following insights:
1) Production Resumes, Operating Rates Up
The average operating rate at the surveyed 36 lead producers was 67.03% in November, up from October’s 64.37%. With the exception of the Shaoguan smelter, Henan Zhicheng Gold and Lead Company, Lingbao Xinling Lead Industry Company, Shaanxi Qiandongshan Company, as well as Hanzhong Zinc Company, previously affected either by power restrictions or unit maintenance in October, resumed normal operations in November. Most lead smelters say they will increase operating rates based on market demand and orders, and not automatically due to close of the year.
2) Expansion Projects to Come Online, Limited Short-Term Increase in Operating Rates
During 2H 2010, the 100 kt/yr in new capacity at Yunnan Tin Group, as well as 80 kt/yr in gold and lead capacity at Luoyang Yongning Gold and Lead Smelting Company, have gradually come online. In addition, the expansion in capacity from 60 kt/yr to 210 kt/yr at Anyang City Minshan Nonferrous Metal Company is also expected to come online in the near future. Some smelters in Henan province, such as Anyang Gold and Lead Corporation and Jiyuan Wanyang Smeltery Group have upgraded technology, allowing for improvements in output. However, SMM believes any further increases in operating rates at smelters will be limitedly in the short term since technical problems will inevitably arise as new equipment and capacity comes online.
3) Strong Selling Interest at Smelters
With the US dollar index around 80 and LME lead prices fluctuating between USD 2,300-2,400/mt, prices in China’s domestic lead markets were little changed last week. Despite current low domestic lead prices, most smelters were still aggressively selling goods to generate cash flow and due to the lack of clear market trends for LME lead prices.