SHANGHAI Dec. 21 (CBI China)--Last Friday, 10 major lead smelters in Shadian District, Gejiu City, Yunnan Province began a joint action to halt production and suspend sales due to:
1) Cancellation of preferential tax rates for special enterprises, which caused higher taxes and lower profits for the smelters.
2) Rapid drop in lead prices which are eroding profit margins.
These 10 smelters will not likely resume production until after the Chinese New Year (6-13 February 2008) and will depend heavily upon changes in local government policy and the lead market situation at that time.
The capacity for these 10 smelters is estimated to be 300 – 400kt p.a., and accounts for 10% of total China production. These smelters kept their operating rates low during 2007, so any shutdown will only cause the national total lead output to drop by about 5%. Any impact on the domestic lead market will be limited in the short term due to high inventory levels and weak market demand.