SHANGHAI, Jan. 14 (SMM) – SMM’s latest survey shows the average operating rate at 43 surveyed primary lead smelters in China fell during December by 1.87 percentage points to 66.98% and with output totaling 230,100 mt.
The average December operating rate at large smelters rose to 87.95%, up slightly from November’s 86.16% rate, while the operating rates at medium and smaller smelters fell by 3.89 percentage points and 4.71 percentage points MoM, respectively, to 56.25% and 41.74%.
Sagging demand from lead-acid battery producers in December drove down the average price for #1 lead to RMB 14,730/mt, a low last seen in September 2009. The average price for silver also fell in December to RMB 6,410/mt, down from November’s RMB 6,685/mt. However, larger smelters reported higher operating rates despite dismal market conditions since the large proportion of long-term contracts at these smelters kept production stable and since expanding spot discounts allowed more opportunities for deliveries. Spot discounts over the most active SHFE lead contract price have remained high between RMB 300-500/mt since November and were actually greater than RMB 500/mt in December, prompting a large influx of deliverable brands to move into SHFE warehouses. Data from SHFE showed SHFE lead inventories growing by 13,300 mt in November, then growing again from 49,649 mt to 78,328 mt in December, almost doubling the growth from November. In response, large smelters, including Yubei Gold & Lead, Jinli Nonferrous Metal, Shuikoushan Nonferrous Metal, and Anyang Minshan Nonferrous Metal, all reported an increase in output of between 1,000-2,000 mt.
A lower average operating rate at medium smelters was mainly attributed to maintenance at Yunnan Tin Group and Guangxi Cangwu Nonferrous Metal. Despite higher lead output from Yongning Gold & Lead, Jingui Silver, and Tongguan Nonferrous Metal, this gain was offset by a decline in output of as much as 10,000 mt at Yunnan Tin Group and Guangxi Cangwu Nonferrous Metal.
The average operating rate at small smelters with low risk tolerance was dragged down by waning consumption and falling lead prices. These smaller smelters are mainly located in Yunnan province and SMM has learned that most of these smelters have actually halted production. As no tariff is imposed on lead plate exports, and as the Shanghai/LME lead price ratio remains around 6.3, several small enterprises in Yunnan province intended to export lead plates.
