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China's Lead Scandals to Spur Industry Mergers, Macquarie Says

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HONG KONG, Aug. 26 -- Lead poisoning cases in China, the world's largest producer of the metal, may foreshadow mergers among smelters as the government cracks down on polluting producers, an analyst at Macquarie Group Ltd. said.
&nbsp;&nbsp;&nbsp; Government-ordered closures of small smelters with outdated technology may accelerate amid increased complaints about pollution, Bonnie Liu, a Macquarie analyst said in a phone interview from Shanghai today. 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.
&nbsp;&nbsp;&nbsp; Lead, used in car batteries, has doubled this year and jumped 11 percent this week on concern shutdowns at Chinese smelters may spread. The metal-making industry in China is fragmented, with the top five producers accounting for 24 percent of the nation's annual total, according to Beijing Antaike Information Development Co.
&nbsp;&nbsp;&nbsp; &quot;State scrutiny of producers may increase in the coming weeks as China approaches its 60th anniversary on Oct. 1,&quot; as the government wants to contain any potential for social unrest, Liu said. The measures should intensify market concern about the metal's supply in the short term, Liu said.
&nbsp;&nbsp;&nbsp; At least 400,000 tons of annual smelting capacity has been forced to shut indefinitely because of failure to meet national environmental standards, Calyon analyst Robin Bhar said in an e- mailed report yesterday, citing their own calculations.
&nbsp;&nbsp;&nbsp; More Closures 
&nbsp;&nbsp;&nbsp; &quot;This equates to 11.4 percent of operating lead capacity in China and 4.7 percent of global refined production,&quot; Bhar wrote. &quot;Those smelters that have closed are the ones that we know about because of newswire reports. Inevitably, there are likely to be many others, especially smaller, inefficient and polluting plants that have already been or will be shut, which will not get reported.&quot;
&nbsp;&nbsp;&nbsp; China's Henan Jinli Lead Group has suspended 60,000 metric tons of outdated production capacity, a company official said yesterday. A further 60,000 tons has been shut in Jiyuan city, Henan province, she said, adding she wasn't aware of other closures in the region. Henan is China's largest lead producer.
&nbsp;&nbsp;&nbsp; &quot;It's guesswork how much lead capacity has really been shut,&quot; Macquarie's Liu said, adding she hasn't heard top smelters such as Henan Yuguang Gold and Lead Co. and Shenzhen Zhongjin Lingnan Nonfemet Co. have made cuts.
&nbsp;&nbsp;&nbsp; Henan Yuguang Gold, China's largest lead maker, has been running at full capacity with no plans to cut production, Li Weifeng, the company' chief engineer said yesterday.
&nbsp;&nbsp;&nbsp; Poisoned Children 
&nbsp;&nbsp;&nbsp; As many as 1,354 children living near the Wugang Manganese Smelting Plant in Wenping, Hunan province were found with lead that exceeded the &quot;normal&quot; level of 100 micrograms per liter of blood, the Xinhua News Agency reported, citing an unidentified city official. Authorities shut the plant on Aug. 13, Xinhua said.
&nbsp;&nbsp;&nbsp; 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.
&nbsp;&nbsp;&nbsp; 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.
&nbsp;&nbsp;&nbsp; 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.
&nbsp;&nbsp;&nbsp; (Source: Bloomberg)
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