The average operating rate at small smelters with capacities below 50,000 mt/yr rose sharply from 57.06% in May, to 67.38% in June, an increase of 10.32 percentage points MoM. Operating rates at medium smelters averaged 50.10%, up 4.99 percentage points MoM, while the average rate at large smelters edged up 1.3 percentage points MoM to 72.01%. 

 

Steelease attributes the increase to resumed production following maintenance during May. Resumption of operations at Wanyang Nonferrous, Jinli Gold & Lead, Anhui Tongguan Nonferrous, Yunnan Tin Group, Shibin Lead, and Shadian Xingsha Nonferrous combined to add another 15,000 mt in lead output. 

 

Meanwhile, most SOEs and listed companies now preparing mid-year financial reports also ramped up production during June to achieve output targets, but output growth was limited by low prices for lead and silver. 

 

Despite the higher average operating rate for June, primary lead smelters were still unwilling to maintain normal production for two major reasons. 

 

First, both silver and lead prices continue to fall, while persistently high input prices were causing losses at most smelters. As an example, Yubei Gold & Lead and Shadian Lead Industry cut nearly 10,000 mt in lead output. 

 

Second, smelters were still experiencing shortages of raw materials. China’s lead concentrate imports fell 18% YoY through the first six months due to the low Shanghai/LME lead price ratio, while primary lead output increased over 20% in the same period according to the China Nonferrous Metals Industry Association. This imbalance has driven primary lead smelters to source raw materials in domestic markets, but domestic lead mines refrained from selling due to weak lead and silver prices, with TC for domestic concentrate falling from RMB 1,800-2,000/mt to RMB 1,700-1,900/mt, and even as low as RMB 1,500-1,600/mt. 

 

SMM expects operating rates at smelters to hold steady during July since additional production cuts or production resumptions were not expected. Limited changes in silver and lead prices should also help keep production stable.