SHANGHAI, Jul. 2 (SMM) –
Lead concentrate
According to data from the China Nonferrous Metal Industry Association (CNIA), China produced 270,900 mt of lead concentrate in May, up 8.75% MoM and a new record high for monthly lead concentrate output. YTD output through May was 1.1119 million, up 27.87% from a year earlier.

Lead concentrate output in Sichuan province rose by over 90% in May, to 53,000 mt, and was responsible for contributing the most to the increase in total output. Recent heavy rains in Sichuan province during May have helped alleviate drought conditions, which will help increase production at mines since electricity restrictions caused by water shortages were eased. Lead prices also rose from late April to early May and gave mines incentives to ramp up production, but most mines contacted by SMM reported normal production, leaving the  90% growth in output suspect. The significant rise in lead concentrate output may actually be cumulative unreported production over the past few months. Other major concentrate production bases, such as Inner Mongolia and Guangdong province, also helped raise total output.

Data from CNIA shows China’s lead concentrate output each month has been increasing since the start of 2012, with an average monthly YoY growth reaching 60%. Monthly output of lead concentrate in Inner Mongolia, Fujian, Hunan, Guangxi, Sichuan, and Yunnan all increased over 40% on average due mainly to consolidation of mines in these regions. This was particularly noted in Fujian and Hunan, where average increases exceeded 70%.

Lead prices have remained below RMB 15,000/mt recently after slumping last September, but TC for domestic lead concentrate has changed little, a sign that lead concentrate prices were falling. Now that lead concentrate prices are relatively low, mines were not interested in accelerating production just to sell goods at lower prices.

Refined lead
According to data from the CNIA, China’s refined lead output in May was 356,800 mt, up 2.63% MoM. YTD output through May was 1.5545 million mt, a drop of 5.71% from a year earlier. Although lead prices remain low, refined lead supply in May was increasing thanks largely to resumption of production at primary lead smelters.

SMM’s average price for #1 lead from January to May was RMB 15,626/mt, down nearly RMB 1,450/mt from the same period last year. Although lead output was down 5.71% YoY over the first five months of the year, lead output picked up in May and was able to grow 7.4% MoM.

The sharp decline in lead prices did not lead to massive production cuts experienced last year.  SMM’s recent survey showed only two primary lead smelters located in Henan and Yunnan provinces reported lower operating rates, but was due to equipment maintenance. Output is stable since most primary lead smelters were less influenced by falling lead concentrate prices following the slump in lead concentrate prices during 3Q 2011.

Secondary lead output, in contrast, has been affected by environmental protection inspections and tax policies for the secondary lead industry. China’s secondary lead output showed significant declines from January to May, with the proportion of lead output in each month falling from 30% in 2011, to the current 20%. Lead output from the large concentration of secondary lead smelters in Anhui province fell by nearly 80% between January and May from a year earlier. Secondary lead output growth may slow, however, due to industry reorganization and strict environmental protection inspections.