Chinese lead smelters cut output on ore shortages

Chinese lead smelters are cutting production because of high prices of imported concentrate and reduced exports of refined lead due to a new tax, industry sources said on Friday.

Lower Chinese output might double local lead prices in two years and could further drive up world prices of the metal, used by battery makers, to surpass aluminium and zinc prices.

"Some 600,000 tonnes of capacity is not used currently," Tang Chenghe, chairman of Anyang Yubei Gold and Lead, said late on Thursday.

"In the next two years, lead prices reaching 30,000 yuan (RM13,579) is no longer a dream," he said.

World prices hit a peak of US$2,550 (RM8,797) a tonne on Thursday, reflecting worries over low Chinese exports.

High world lead prices were raising Chinese smelters' costs of imported concentrate and spurring them to cut imports, smelter sources said.

Lead smelters' production costs could reach about 20,000 yuan a tonne if the metal was produced by imported concentrate, based on world lead prices of US$2,470 on Friday.

Spot primary refined lead traded at about 17,600 yuan a tonne in Shanghai. Many Chinese smelters relied on imported concentrate as China produced less than 30% of its ore requirements.

"(Some) smelters are going to close. The situation is getting serious," said a trader at Yuguang Gold and Lead Co, which is the top lead producer in China.

"(World) lead prices are crazy. It could rise over aluminium and zinc," he predicted.

Yuguang in the central Henan province might be forced to close one of three 100,000-tonne-a-year smelting systems in the second half if supply of concentrate did not improve soon, he said.

Yuguang had virtually stopped exports of lead in June due to the new tax, the trader said. It exported some 4,000 tonnes in May.

China's exports might fall in half in June from May, he predicted. Exports fell 21.9% from a year earlier to 42,991 tonnes in May, official data released on Friday showed.

Beijing from June 1 imposed the 10% tax on exports of lead to cool investment in the energy-intensive sector and help trim the country's huge trade surplus.

A trade division manager at Xinling Lead Co in Henan said many smelters in the province, including Xinling's 100,000-tonne-a-year plant, were operating 20 to 30% below capacity since early this month.

The province produced about 400,000 tonnes of primary lead a year.

Tang said Anyang Yubei, also in Henan, would reduce imports of lead concentrate in July to September and slow down metal production.

Traders said reduced imports of lead concentrate from China had driven up spot processing fees paid by overseas sellers to Chinese smelters to about $120 a tonne versus $50 to $60 under 2007 contracts.

But spot fees were still too low to attract Chinese smelters' imports. –




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