SHANGHAI, Oct. 10 (SMM) –

Lead Concentrate
Data from the China Nonferrous Metals Industry Association (CNIA) show China’s lead concentrate output during August was 290,600 mt (lead content), up 10.59% MoM, while YTD output through August was up 27.09% YoY, at 1.9675 million mt (lead content).

Two major factors contributed to the increase in lead concentrate output during August. First, increases in lead prices boosted profits at mines. SMM sources reveal the average lead price in August rose above RMB 15,000/mt and hit a three-month high. Mines previously reluctant to move goods at low lead prices are now more willing to sell goods due to growing financial pressures and higher profit margins. Second, demand from primary lead smelters was also up. According to SMM’s survey, operating rates at primary lead smelters in August averaged 61.16%, up 6.2 percentage points MoM, and rebounding after falling for three straight months. LME lead prices have also been rising since mid-August, and since SHFE lead prices grew slower, the Shanghai/LME lead price ratio fell to 7.7, leaving little profit for importing lead concentrate and helped boost demand for domestic lead concentrate.

During August, lead concentrate output in Inner Mongolia, Sichuan, Guangxi, Hunan, Yunnan, and, Guangdong all exceeded 10,000 mt, and accounted for 81% of China’s total output. Yunnan, Hunan, and Guangxi reported the sharpest MoM increases of 51%, 32%, and 27%, respectively, since smaller mines were more responsive to changes in lead prices. Statistics from the Ministry of Land & Resources show Yunnan, Hunan and Guangxi has 59, 56, and 75 mines in operation during 2011, outstripping all other regions across China.

Refined Lead
According to the CNIA, China produced 443,300mt of refined lead in August, up nearly 7.5% from July. YTD lead output through August was 3.0637 million mt, up 8.6% from a year ago.

Primary lead output in August was 312,300mt, up 6% MoM, and echoed a SMM survey which showed the average operating rate at primary lead smelters in August rising by 6.2 percentage points MoM to 61.16%.

With lead prices above RMB 15,000/mt during August, enterprises increased output. Lead output in Henan province, one of China’s major lead production bases, rose 8.5% to 136,500 mt, as Yuguang Gold & Lead, Jinli Gold & Lead, and Wanyang Smelting all increased production. Most enterprises also completed regular maintenance, adding to output. The resumption of production at Chihong Zn & Ge contributed the greatest to the 12.07% increase in lead output in Yunnan province. Output at Anhui Tongguan Nonferrous Metals also increased 6,000 mt during the month. The Shanghai/LME lead price ratio has also remained above 8.0 since mid-June, prompting smelters to import lead concentrate in large amounts. Low import prices and ample supply of raw materials also boosted smelter enthusiasm for increasing output.

China’s secondary lead output hit 131,000 mt in August, up 12% from July. However, an SMM survey showed the average operating rate at secondary lead smelters was only 58.53%, down 4% from July and due to the following reasons. First, demand for secondary lead and lead alloy was sluggish since operating rates at lead-acid battery producers remained low. Second, prices for scrap batteries were pushed up since higher temperatures lowered demand for replacement of batteries and since many illegal secondary lead enterprises have recently re-emerged. The average price for scrap automotive batteries was RMB 8,030/mt in August, up from RMB 7,960/mt. Finally, some large secondary lead smelters, including Jiangsu Chunxing Alloy, were still conducting maintenances.