[Pb] SMM Survey - Operating Rates at Domestic Primary Lead Smelters

SHANGHAI, Aug. 13 (SMM) -- A recent CBI survey of 25 major domestic primary lead smelters (total capacity: 2.41 million mt/yr) revealed the following insights:

    1) Operating Rates

    Domestic lead prices moved in the RMB 13,300-14,000/mt range during July, while LME lead prices moved upward, generating incentives for domestic medium and small primary lead smelters to increase production. Although hot weather is unsuitable for smelters to operate at full capacity, overall operating rates at lead smelters reached a record high for the past seven months following the decline in large-scale maintenance.

    2) Lead Concentrate

    Shortages of lead concentrate will remain unchanged as production grows from restarts and  new primary lead smelting capacity. Spot TC/RC of imported lead concentrate remains stable around USD 40-50/mt, while LME lead three-month contract prices soared more than 10% to USD 1,870/mt. Operating rates at domestic lead and zinc mines experienced growth on a monthly basis, but mine operators showed little interest in driving production and sales, since domestic lead prices rose at only a modest rate compare to LME prices.  TC/RC of lead concentrate (55-60%) remained below RMB 2,500/mt, with limited market supply.

    3) Prices Forecast

    Domestic lead prices have been unable to breakthrough the RMB 14,000/mt barrier since late June due to ample market supply and weak demand. Domestic consumption by lead-acid battery manufacturers was sluggish due to poor end-user demand, and since manufacturers were unwilling to build excessive raw materials stocks in view of market risks. At present, the domestic/LME lead price ratio is near 7.1, leaving some possibility of exports. Most market insiders were cautiously optimistic with regard to the strength of demand during the traditional stock replenishment period in late 3Q, and this demand will remain a major factor for domestic lead prices to move upward in the long run.

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