SHANGHAI, Mar. 12 (SMM) –An SMM survey of 43 domestic major primary lead smelters (total capacity: 4.045 million mt/yr) revealed the following insights:

1) Average Operating Rate at Primary Lead Smelters Down Slightly in February
According to an SMM survey, the average operating rate at domestic major primary lead smelters fell by nearly 4% MoM, from 56.32% in January to 52.42% in February. Refined lead output at the 43 surveyed primary lead smelters was 180,100 mt, also down 13,400 mt.

Operating rate at large smelters with capacities above 100,000 mt/yr rose to 76.33% in February, up from 71.99% in January and with output also increasing significantly. Jiyuan Jinli Smelts and Jinxin Company, a subsidiary of Shuikoushan Nonferrous Company, were conducting repairs during January, but resumed normal operations in February. Since the average price of refined lead in China’s domestic spot markets rose in February by RMB 400/mt over January levels, large smelters were encouraged by higher prices to increase output. As such, average operating rate at large smelters improved notably MoM.

The average operating rate at medium smelters with capacities between 50,000-100,000 mt/yr fell sharply due to environmental protection inspections and regular repairs. Among the 28 medium smelters surveyed, five smelters were under repairs and reported virtually zero output during February. Another six halted production in response to either recent cadmium pollution or lead poisoning incidents. A severe drought in Yunnan province also caused output to fall at some local smelters.

Small smelters with capacities below 50,000 mt/yr reported nearly 10% growth in operating rate during February, and was mainly due to completion of repairs and resumption of production at Huludao Zinc Industry and Gejiu Tongfu Power Metallurgy.

2) Majority of Smelters Expect Lead Prices to Rise
Also according to the SMM survey, most industry insiders expect lead prices will rise in March for the following reasons:

Lead concentrate imports remain low due to the unfavorable Shanghai/LME lead price ratio, while domestic crude lead supply was also falling short. Given constant shortages of raw materials, operating rates at smelters remain low, so refined lead output may continue to decline. In addition, since some smelters had to limit sales due to lower output caused by repairs and environmental protection inspections, lead supply will likely fall significantly in the near term.

Although environmental protection inspections were initiated in some provinces such as Shandong and Hebei, refined lead demand from battery producers was unchanged. This imbalance in supply and demand should help support current lead prices.