SHANGHAI, Dec. 5 (SMM) –
According to the China Nonferrous Metals Industry Association (CNIA), China’s domestic lead concentrate output in October was 233,000 mt, up 4.6% MoM, while YTD output through October reached 1.85 million mt, up 22.4% YoY. Despite a slower MoM growth rate, total output continued to rise.
Operating rates at primary lead smelters fell as smelters cut production for repairs or maintenance during September and October. However, cold weather and water shortages at mines in North China, especially Inner Mongolia, restricted production and resulted in a reduction in lead ore output in North China. Smelters began stocking lead ore in August, helping increase demand for domestic lead concentrate, with ore output in Hunan, Yunnan, Gansu, and Guangxi increasing by 19%, 15.6%, 18%, and 9%, respectively. The increases offset the reduction of output from Inner Mongolia, Shaanxi, and Qinghai, where output fell by 4%, 6%, and 23%, respectively. Since prices of lead concentrate are calculated on the basis of refined lead prices, most mine operators believe the rise in lead prices will be limited due to the unresolved European debt crisis, helping keep output relatively stable.
Data from CNIA shows China’s refined lead output in October was 404,000 mt, down 0.65% MoM, while YTD output through October reached 3.79 million mt, up 13% YoY. Output of primary lead was 264,800 mt, with output flat at the previous month’s level and accounting for 66% of the total refined lead output in October. Output of secondary lead was 139,000 mt, down 0.2% MoM.
According to a recent SMM survey of primary lead smelters, the average operating rate at primary lead smelters during October was 56.01%, down 0.3% MoM. Refined lead output declined on a monthly basis during October due mainly to low lead prices. The average SMM price for #1 lead ingot fell further in October, to RMB 14,835/mt, down RMB 800/mt MoM, which discouraged output at primary lead smelters and lowered operating rates. The data from the SMM survey also showed larger smelters with capacities over 100,000 mt/yr and with sales mostly in the form of long-term contracts have restarted production gradually. Operating rates at these smelters rose MoM. Data from CNIA also showed refined lead output in Hunan and Henan provinces grew by 2.3% and 5.5% MoM, respectively. However, for smelters with capacities between 50,000-100,000/mt and which produce both zinc and lead, lead production was halted to ensure zinc output. This situation was most common in Shaanxi province. In Yunnan province, output was negatively affected by shortages of water need for power generation. Output in Shaanxi and Yunnan fell by 96% and 12% MoM.
Also found in CNIA data was the fact that secondary lead output fell by 0.2% MoM. Output of secondary lead was affected by environmental protection inspection in Shanghai, Chongqing, and Anhui, but the 94% increase in output in Jiangsu province may be directly attributed to the restarted secondary lead production following the inspections.
In general, refined lead output in October was down MoM and in line with SMM survey results. In November, lead prices continue to fluctuate weakly, and coupled with financial pressures at smelters at year’s end and pressure to meet annual production plans, refined lead output should rise slightly.