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

SHANGHAI, Oct. 22 (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

    Environmental inspections have been conducted at lead smelters in China’s leading lead producing regions since late August, shutting some small smelters immediately, while allowing other smelters with proper environmental protections to maintain normal production. However, lead smelters were forced to shut sintering and other pollution-prone production lines as a result of environmental inspections conducted during September. As a result, large smelters in the CBI survey group reported output declines during September, in line with market expectations. Meanwhile, operating rates at smaller smelters, with capacity less than 50kt/yr, were only slightly affected due to geographic distribution of the smelters and the limited number in the survey group. In this context, domestic output of primary lead during September is expected to decline by nearly 5% on a monthly basis, to 218kt.   

    2) TC of Lead Concentrate

    LME lead prices hit new highs in early September, supported by environmental inspections at China’s domestic lead smelters, affecting supply sentiment and moving prices into the USD 2,100-2,350/mt range.  Although domestic lead prices rose as well, a situation with strong LME lead prices and weak domestic lead prices continued, helping reduce imports of lead concentrate. In this context, suppliers had to raise spot TC for imported lead concentrate slightly to USD 80/mt, but this move failed to improve existing production sentiment of lead smelters, given current high production costs.

    3) Market Forecast

    Base metals have shown strong performances, with ample capital liquidity expected for 4Q, and as the global economy gradually recovers. Market players predict domestic lead prices will likely increase during 4Q given tight supply of raw materials in China, stable growth in lead demand, as well as strict environmental protection inspections.

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