MYMETAL: Supply concerns lift China lead futures prices
On March 30, the closing price of the most-traded primary lead contract on SHFE for May delivery had increased Yuan 285/tonne ($43.4/t) on day to Yuan 15,425/t. In comparison, the SHFE’s corresponding prices of copper and aluminum declined Yuan 460/t and Yuan 60/t to Yuan 65,880/t and Yuan 17,345/t respectively on Monday.
The near 2% on-day jump in lead prices mainly reflected market concerns regarding supply of the metal. Last week over March 20-26, output from the 20 primary lead producers Mymetal tracks was 45,800 tonnes, down 1,550 tonnes on week.
Further significant falls in output are expected in April as more smelters plan maintenance stoppages that month, Mymetal’s investigation showed.
Ten primary lead producers have scheduled maintenance in April or early May, with the duration of most of the stoppages expected to be around one month. Mymetal estimates that in total, the maintenance may reduce primary lead output by 40,500 tonnes.
The reduced availability of lead concentrates is another reason why primary lead output is being restrained, a Shanghai-based analyst noted.
“Some mines in Inner Mongolia have scaled down or suspended production due to the controls being placed on energy use among industries,” he observed.
A recent central government review found that North China’s Inner Mongolia was the only region among the examined that had failed to meet power consumption and intensity control targets, as reported, and since last December, the local government began strictly controlling local energy consumption – a crackdown that has been affecting local ferrous and non-ferrous metals industries.
“Raw materials stocks at some primary lead smelters have fallen below the level they need to maintain stable operations,” the analyst said.
For secondary lead smelters, their production has also been curbed due to environmental protection measures, according to a second source based in Shanghai.
In East China’s Jiangxi province, the requirement of secondary lead producers to update their desulfurization equipment is delaying their resumption of operations after the Chinese New Year holiday break in late February, according to him.
Suspensions due to environmental upgrading are also seen in Southwest China’s Guizhou province. Secondary lead producers in Guizhou’s Kaili city are still suspended “and the date of resumption remains unknown,” the source said.
Over March 20-26, output among the 30 secondary lead smelters Mymetal tracks nationwide totalled 46,200 tonnes, unchanged on week, Mymetal’s survey showed. Output is seen declining slightly to 45,300 tonnes this week, however.
Written by Olivia Zhang, zhangwd@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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