Tight Supply to Bolster China Physical Lead Prices, SMM Says

SHANGHAI, Jan. 15 (SMM) – Tightening supply of both primary and secondary lead is likely to bolster physical lead prices in Cina, says Zhu Rongrong, an analyst with Shanghai Metals Market.

Low secondary lead prices largely squeezed margins for smelters, leaving even unlicensed smelters unprofitable. This has resulted in massive stoppages in late 2014, especially at those unlicensed companies.

Furthermore, Anhui’s Huaxin Lead Industry Group has shut down smelters in its old factory zone due to a failure to meet environmental protection requirements. “The suspension will surely exacerbate the supply tightness in secondary lead market,” Zhu noted, “besides, those closed smelters are unlikely to restart on the horizon as it is not cost-effective to reopen just one month before the Chinese New Year holiday.”

As for primary lead, production is expected to fall by another 20,000 tonnes in January as more smelters have joined in production halt or maintenance, the latest SMM survey indicates.

“Thus, we conclude that physical lead prices will be more resistant to declines even though lead futures have been dragged down by plummeting crude prices,

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