China May Boost Imports if LME Lead Falls about $100 Further

HONG KONG, June 4 (Reuters) - Steadily falling London Metal Exchange lead prices MPB3 in the past month may soon prompt Chinese smelters to increase imports of spot refined lead, traders said on Friday.

Traders said an arbitrage import window could open wide following a 20 percent drop in LME lead prices this past month.

Traders are eyeing a further price fall of about $100 from around $1,636 per tonne in Friday's Asian trade, creating margins of about 1,500 yuan ($220) per tonne seen attractive on a tax and freight basis to Chinese importers at Friday's Chinese spot lead price PB-1-CCNMM of 14,525 yuan ($2,127).

"The import option is more favorable now," a lead trader in Shanghai said, adding that China, the world's top lead consumer, imported a record of 36,357 tonnes in April last year when the arbitrage window was open. 

Imports dived to just 260 tonnes in April this year as the arbitrage window remained closed.

Chinese lead smelters have increased imports of tariff-free lead concentrate imports in the past two weeks, driving down spot treatment fees paid to Chinese smelters for processing material, now offered at $60-$70 per tonne versus $110-$130 in March. [ID:nTOE651063]

Refined lead imports are subject to 3 percent import tariff and 17 percent value-added tax (VAT). Concentrate imports do not carry tariff and are subject to a 13 percent VAT.

But some lead traders cautioned that importing now may be risky as price can fluctuate quickly in the current market.

"Imports take about a week to arrive. Who knows what the price would look like in a week," a sales manager at a large lead smelter in Henan said, of taking metal from Singapore's LME warehouses.

"Unless the margins rise to about 1,500 yuan per tonne, importers should not buy a lot," he said.

The sales manager said weak domestic demand would also limit spot imports for now given the peak consuming season typically was in the winter when battery replacements for cars rose in China.

In Shanghai alone, around 120,000 tonnes of refined lead are stored in warehouses, more than a third of China's production in April, traders estimated.

The stocks do not include refined lead stored in bonded warehouses in the city. ($1=6.83 yuan)