SHANGHAI, Jul. 11(CBI China) -- CBI successively hosted the Lead and Downstream Industry Market Forum on July 4th in Ningbo, Zhejiang province.  The event was attended by a large number of representatives from major upstream and downstream enterprises, and attendees reached the consensus on many major issues facing China's lead market.
 
First:  Output of domestic lead concentrate rose, but market supply failed to see evident increases. 

    According to China Non-ferrous Metals Industry Association (CNIA)'s data, output of domestic lead concentrate experienced rapid growth over the past five months. Lead smelters reported they found it much  easier to purchase goods in domestic markets than before, but TC of domestic lead concentrate was relatively unchanged, as mine operators held the initiative with regard to pricing.  One officer of a large domestic mine  operator reported output of lead and zinc concentrate would continue to increase slightly during the remainder of 2008, and predicted TC of domestic lead concentrate would remain around RMB 3,000/mt mark in the 2H08. 

Second:  Transactions of imported lead concentrate were brisk, and spot TC may continue to drop. 

    Imports were profitable due to the high domestic price/LME price ratio.  Lead smelters reported an increase of imports on a yearly basis.  Spot TC may continue to drop in view of the high domestic/LME price ratio, as well as strong demand for imported concentrate. 

Third:  Downstream producers were still cautious at purchasing imports. 

    Domestic markets saw an increase in imports due to the high domestic/LME price ratio, while lead smelters believed the high domestic/LME price ratio was linked to the lack of lead futures in domestic markets, and narrow domestic price fluctuations when compared with LME lead prices.  Lead-acid battery producers expressed the following concerns on imports.  First, quality of lead-acid storage batteries may be affected, as purity of most imported goods is lower than domestic #1 lead.  Second, there is an interval between price offers and actual delivery of goods, leaving downstream producers financially exposed.  Third, procedures involving importation of goods is complicated. 

Fourth: Production costs increased, but impact was limited.

    Production costs for mine operators rose mainly to increases in electric power and oil-related products., with production costs rising by 8% during the first half of 2008.
Production costs for smelters also increased greatly.  Direct production costs of lead grew by 20-30% per mt, but soaring sulfuric acid prices would compensate for the rising production costs.

    Although rising sulfuric acid and plastic prices increased lead-acid battery producer costs, the impact was offset by the sharp drop in the price of lead ingot, which accounts for a large proportion of raw material costs. 

Fifth: Downstream industry concentration has improved, while the growth rate of production will slow.

    Representatives attending the discussions reported production and sales in their companies would continue to increase during 2008, but the industry-wide growth rate would slow down.

    Mr. Zhou, coming from one of the largest electric-bike lead-acid battery producers, said profit margins were falling, despite growth in sales and production.  In 2007, the electric bicycle battery industry saw great changes.  One third of electric bicycle battery producers stopped production, one third cut or halted production temporarily, while the remainder expanded development rapidly. 

    Mr. Chu, engaged in lead-acid battery production for SLI battery, said the soaring oil prices will dampen consumption for automobiles, but the company was optimistic about the outlook in the forklift industry.

    Development in the valve-controlled sealed battery industry was stable, but the strong RMB was having a negative impact on exports.  If the RMB strengthens against other major currencies, exports will be greatly affected.  Another uncertainty expressed at the forum was whether or not the Central Government would adjust export taxes after canceling export rebates in 2006.