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

SHANGHAI, Sept. 24 (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 rose above RMB 13,500/mt during the first three weeks of August, but met resistance at RMB 14,000/mt twice.  Even so, domestic primary lead smelters remained positive with regard to production.  Imports of lead concentrate were 174kt during July, setting a new high for 2009, an indication of higher operating rates at large and medium lead smelters. In late August, local governments in China’s major lead producing provinces implemented environment inspections at lead smelters.  Small smelters shut down for unit maintenance immediately, while other large smelters with required environment protection equipment and safeguards were maintaining normal production.  

    2) Price Forecasts

    Major market players predict lead supply will decline, with shut capacity throughout China estimated at 250-500kt, and due to the negative impact from the environmental protection inspections at domestic lead smelters.  However, LME lead prices have risen to USD 2,518/mt since late August, later fell to USD 2,025/mt in mid-September, but is still an indication of strong speculative activity in the market.  Raw material costs at domestic lead smelters have been driven up increasingly, and therefore, lead prices should increase before mid-October due to higher costs, even if domestic lead supply is relatively sufficient and downstream demand remains soft.

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