Lead TCs Rise to $80-90 in China

SHANGHAI, Sept. 30 -- Chinese lead treatment charges (TCs) increased by up to USD 20/mt this week but remain unprofitable, according to smelters.

    TCs for imported lead concentrates rose to USD 80-90/mt, compared with USD 70/mt two weeks ago and USD 40-50/mt in May.

    "Lead TCs have gone up, but correspondingly, we also saw a surge in lead prices on the LME," said an analyst in Shanghai. This means smelters also have to pay more for the imported concentrates.

    Chinese smelters can only make profits when TCs are at least USD 170-180/mt, given current London Metal Exchange prices, according to another analyst.

    "But, if the concentrates contain silver or other by-products, they may help to offset the losses," the second analyst said.

    "As far as I know, Chinese smelters are making an average loss of RMB 780/mt (USD 114/mt) if the TC offer is USD 90/mt," the first analyst said.

    Market participants said most of the smelters were continuing to produce at a loss because they are encouraged to do so by local governments keen on propping up GDP.

    "They have to maintain high rates to keep the local economy ticking over," said an analyst from an investment company in Shanghai.

    "Also, if they decided to shut down or just close some capacity, it will take some time to restore production, for technical reasons. So unless they are making huge losses, Chinese smelters won't stop operations very readily," he said.

    (Source: Metal Bulletin)