SHANGHAI, Oct. 22 (SMM) – The most recent survey conducted by Shanghai Metals Market (SMM) indicates that operating rates at China's primary lead smelters grew to the highest level for the year in September boosted by production resumption and rising prices.
SMM’s latest survey of 49 Chinese primary lead smelters with a total capacity of 4.705 million mt/yr reveals an average operating rate of 61.83% during September and with refined lead output of 239,100 mt.
The average operating rate at large smelters with capacities above 100,000 mt/yr grew by 6.42 percentage points to 78.09%, and mid-sized smelters also saw their average rate up 5.07 percentage points from August’s 46.41% to 51.48%. The average rate at small smelters with capacities below 50,000 mt/yr edged up only 0.22 percentage points MoM to 61.83%.
The higher operating rates were due in part to resumption of production at smelters that had previously halted for maintenance and due to some smelters increasing output. Yuguang Gold & Lead, Jinli Gold & Lead, Chihong Zn & Ge, Zhicheng Gold & Lead, Guiyang Yinxing Nonferrous, Shandong Humon, Jinde Lead, Hechi Nanfang Nonferrous, Hanzhong Zinc, and Xinjiang Hengchang Smelting together reported over 25,000 mt in output growth during September. Only Yunnan Tin Group, Liaoning Haicheng Nonferrous, Jiangxi Lead & Zinc, and Shaanxi Nonferrous were forced to cut production, curtailing output by about 10,000 mt.
Lead prices and raw material supply continue to be major factors affecting lead production during September.
Prices for lead and silver held steady and with SMM #1 lead price averaging RMB 14,242/mt during September, down slightly from August’s RMB 14,350/mt. Most smelters considered September prices acceptable, especially when compared to the low RMB 13,700/mt in July. SMM #1 silver price rose to RMB 4,540/mt during September from August’s RMB 4,392/mt, which encouraged smelters to ramp up production.
The shortage of lead concentrate also eased in September. According to China Customs, China’s lead concentrate imports grew noticeably in August and September, with monthly volumes hitting 140,000 mt, which were well above the 9,000 mt monthly average through the first nine months of this year. Higher import volumes and high lead content in imported concentrates helped ease tight lead concentrate supply. In addition, lead price gains beginning in August also motivated some domestic lead ore mines to begin selling goods, allowing smelters to restart or accelerate production.
Nevertheless, these two factors failed to raise operating rates at small primary lead smelters, which are mainly situated in Yunnan province, since local governments toughened requirements for environmental protection equipment, such as desulfurization equipment, resulting in an increasing number of smelters closed down. As a result, many small lead smelters were conducting technology upgrades during September, while others halted operations. Meanwhile, a limited supply of crude lead depressed production at those smelters in operation during the month. SMM believes the average operating rate at primary lead smelters will remain high in October.