China's Xinling Restarts Idle Lead Capacity as Prices Improve

BEIJING, Apr. 8 -- Xinling Refining Co., a Chinese lead and zinc smelter that shut 60 percent of its capacity last year, restarted half of its idled lines as metal prices rebounded, an executive said.

    The Henan province-based smelter is running at 70 percent to 80 percent of its 100,000 metric-ton capacity, He Yonggang, a manager, said by phone from Shanghai. Yunnan Louping Zinc & Electricity Co. is also considering resuming idled zinc capacity, said Zhang Long, manager at the Yunnan province-based company.

    The restarts signal that China's attempts to bolster prices by buying excess metal stocks and spending to stimulate the economy may be helping companies recover from a fourth-quarter slump. Prices of lead and zinc have respectively surged 34 percent and 12 percent this year in London.

    "We expect more smelters to restart idled capacity this quarter as prices stabilize and raw material supplies improve," said Zhang Changhai, an analyst at Beijing Antaike Information Development Co. Mines are also being restarted, he said.

    China's State Reserve Bureau has bought 159,000 tons of zinc this year, and may buy as much as 300,000 tons, people familiar with the transaction said in February. Lead is used to make batteries and zinc is used to galvanize steel.

    "Compared with the fourth quarter, consumption from battery makers improved, but we haven't seen a significant increase," Xinling's He said. "As prices have stabilized, we have restored some production."

    Better Demand

    A shortage of concentrates, used to make the metal, means the company can't run at full capacity, he said.

    China faced a shortage of domestic concentrates after mines were closed because of falling prices, Huludao Zinc Industry Co., the nation's second-largest producer of the metal, said March 12.

    Yunnan Louping is mulling restoring cut capacity because of the improved prices, Zhang said. Zinc output was cut by 30 percent to 4,500 tons a month, the company said in Oct. 29.

    "Demand for zinc improved in the first quarter, compared with the fourth quarter of 2008," said Yang Jinzhu, vice general manager of Yunnan Jinding Zinc Industry Co., which runs the country's largest lead and zinc mine.

    (Source: Bloomberg)