SHANGHAI, Jun. 9 (SMM) – The latest SMM survey of 49 primary lead smelters, with a total of capacity of 4.705 million mt/yr, shows the average operating rate at the surveyed smelters fell to 55.13% during May, down from April’s 57.64%, and with a total output of 220,300 mt.
The average operating rate at large smelters with capacities exceeding 100,000 mt/yr was down significantly in May, falling from 74.70% in April to 70.71% in May, and primarily a result of a total cut in output of 5,000 mt at Yuguang Gold & Lead, Wanyang Nonferrous Metals, Anyang Minshan Nonferrous Metals and Shuikoushan Nonferrous Metals.
Operating rates at medium smelters with capacities between 50,000-100,000 mt averaged 45.11% during May, down from April’s 47.55%. A loss of 20,000 mt in output from Tongguan Nonferrous, Tengyu Nonferrous, Cangwu Nonferrous, and Hanzhong Zinc, was partially offset by a 15,000 mt gain in output from Zhicheng Lead, Chengyuan Mining & Smelting, Haicheng Nonferrous, Humon Smelting, Yongning Gold & Lead, and Jiangxi Lead & Zinc.
Two reasons were behind the decline in output at medium and large smelters. First, both lead and silver prices were down. The average SMM #1 lead price fell by nearly RMB 300/mt during May, while #1 silver prices fell by over RMB 500/kg. Primary lead smelters had little incentive to maintain normal production as market prices for lead fell near cost lines, with profits for by-products also down sharply. Second, raw materials were in short supply. Falling prices for lead and silver caused some mines producing low-grade ore to halt operations. Larger mines, while still maintaining production, were also reluctant to sell goods and mainly concentrated on fulfilling long-term contracts, leaving domestic lead concentrate in short supply. In addition, a falling Shanghai/LME lead price ratio in early April allowed few profitable opportunities for importing concentrate, which was reflected in the 16% YoY decline in lead concentrate imports during the first four months of 2013. As a result, smelters reported difficulties in sourcing raw materials from both overseas and domestic suppliers.
The average operating rate at smaller smelters rose from April’s 50.54% to 57.06% during May, and was due mainly to the resumption of operations at Baiyin Nonferrous Metals.
SMM survey also revealed that fewer smelters had plans to conduct maintenance in June since #1 lead prices were rising. When combined with resumption operations at many smelters, SMM expects average operating rates at primary lead smelters to rise during June.