Since the fourth quarter, China domestic lead concentrate market has continued the situation of low supply throughout the year. Processing fee remains stable, but it's higher in southern areas than in northern areas. Mysteel surveyed from mines, smelters, ports, epidemic and polices.
Mines: The current production is basically on schedule. Except for normal maintenance and some special reasons, the monthly output of the mines is relatively stable. Some southern mines temporarily suspended production due to problems of certificate and flooded mining areas. It is estimated that the mine will not recover its production capacity until November. Some northern mines are expected to suspend production due to weather factors, other mines can basically operate normally throughout the year, except for the Spring Festival holiday.
Smelters: Although there is a shortage of lead concentrate at present, it has little impact on smelters' production, since they keep 1- or 2-months raw material inventory. The production capacity of southern smelters is relatively stable with few new increased. While the situation is different on northern smelters, whose demand on raw material is larger. Since some of them have added several large production lines with a lot of new capacity. Meanwhile, it is the winter reserve time for northern smelters, which enlarges the demand for raw material. This different situation is reflected in the processing fee, which is generally Yuan 800-1,000 per metal tonne in the north, while Yuan 1,300-1,500 per metal tonne in Yunnan, a Chinese southern province.
Ports: This year, the market of import lead concentrate is dominated by long-term orders, with few individual orders. The SHFE/LME ratio and exchange rate are unfavorable to the market of import lead concentrate. The import volume of lead concentrates to the port in September and October was significantly higher than that earlier this year but lower than that in previous years. The accumulative volume from January to August of import lead concentrates decreased by 10.8% year-on-year. At the same time, the domestic demand has increased, and the new production capacity of domestic mines is not much. So, the supply of lead concentrate is relatively tight this year.
Epidemic: This year, the recurrent of epidemic has a great impact on production and transportation, and the upstream and downstream of lead concentrates have been affected. The current epidemic situation in Xinjiang, Tibet and Inner Mongolia has a significant impact on mine production and transportation of raw material. The epidemic situation in Yunnan is also serious, which limits the production of smelters.
Policies: The 20th National Congress is about to be held, which will have a certain impact on the use of detonators and explosives in mines, but it will have little impact on production. In addition, the power restriction policy has a great impact on the production of smelters, especially reflected significantly on smelters in Yunnan province.
In conclusion, with the further expansion of domestic demand, the supply of lead concentrate has shrunk slightly compared with previous years, the market needs to import lead concentrate to fill the demand gap. Recently, with the improvement of SHFE/LME ratio, import profit margin is expanding. It can be expected that imported lead concentrates will fill the domestic demand in the future. Processing fee is expected to remain stable.
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