China's Top Lead Smelter Running at Capacity, No Cuts

SHANGHAI, Aug. 26 -- Henan Yuguang Gold and Lead Co., China's largest lead maker, has been running at full capacity with no plans to cut production, said Li Weifeng, the company's chief engineer.

    "Top smelters like us are strictly adhering to environmental standards, so we don't think we would be affected," Li said by phone from Jiyuan in Henan, the biggest producing province. Two smelters in Shaanxi and Hunan have been closed after more than 2,000 children living nearby were found to have above-normal levels of lead in their blood, the Xinhua News Agency said last week.

    Lead, used in car batteries, has doubled this year and jumped 8.7 percent yesterday on concern shutdowns at Chinese smelters may spread. China, after three decades of 10 percent average annual economic growth, has tens of thousands of industrial sites and chemical factories that often flout environmental regulations. Henan Yuguang produces 300,000 metric tons of lead a year, said Li.

    "We don't think such small closures will spread to a big scale at this stage, and if they last, bigger smelters may expand and quickly make up any production that's lost," Hu Yongda, an analyst at state-affiliated researcher Beijing Antaike Information Development Co., said by phone today.

    "Regional governments can't be more eager to keep growth and jobs at this time even though central government may want to boost environmental protection," according to Hu, who said last week that the lead poisonings may intensify state scrutiny.

    Production Halts

    Still, Henan Jinli Lead Group in Henan province has shut 60,000 tons of output capacity, said a company official, who declined to be identified because it was an internal matter. A further 60,000 tons has been shut in Jiyuan City, she said, adding she wasn't aware of other closures in the region.

    Jinli Lead suspended the capacity along with another smelting company, without any pressure from central or regional governments, the official said, adding they may restart the halted plants at any time. Jinli was among China's top five producers last year, according to Antaike.

    China increased lead production and imports to a record this year as the government's 4 trillion yuan ($585 billion) stimulus plan spurred sales of autos and electric bikes which use the metal for batteries. Output climbed 19 percent to 2.1 million tons in the first seven months from a year ago, the statistics bureau has said. Imports surged 1,163 percent to 139,162 tons, customs data show.

    High Stockpiles

    Inventories in China, the world's biggest consumer, may be enough to ease any shortfall. As much as 200,000 tons to 300,000 tons could be stored by smelters and traders, He Yonggang, a sales manager at Xinling Refining Co, a lead refiner, said this month, citing traders. That's more than double the 119,000 tons stored in warehouses monitored by the London Metal Exchange.

    As many as 1,354 children living near the Wugang Manganese Smelting Plant in Hunan province were found with lead that exceeded the "normal" level of 100 micrograms per liter of blood, the Xinhua News Agency reported, citing an unidentified city official. Hunan, in central China, is the country's second- largest producer.

    Authorities shut the Wugang plant in Wenping on Aug. 13 after suspending operations on July 31, Xinhua said. Wugang's government ordered more than 100 plants in the city to be overhauled, Xinhua said.

    Dongling Smelter

    The results of tests in Wenping followed a protest at a zinc and lead smelter in Shaanxi province, where 851 sick children were found to have above-normal amounts of lead. Hundreds of villagers broke into Dongling Lead & Zinc Smelting Co.'s plant in Changqing, saying the factory poisoned local children, Xinhua said. Dongling has a very small lead production capacity, according to Antaike's Hu.

    Children exposed to excessive levels of lead may become less intelligent than healthy peers and may also have impaired kidney function and anemia, according to doctors specializing in the effects of poisons.

    Lead for three-month delivery dropped as much as 2.5 percent today on the LME to $1,975 a ton and traded at $1,987 at 5:34 p.m. in Singapore.

    (Source: Bloomberg)