Shortage of lead sees 40 percent metal price rise in China in past month
Reduced supply, coupled with high winter demand, has seen lead prices rise by some 40 percent in China in the past month.
Posted: Tuesday , 06 Jan 2009
HONG KONG (Reuters) -
Chinese prices of spot lead, used in batteries, have risen 40 percent in the past month, buoyed by reduced supply and stronger winter demand for automobile batteries, industry officials and traders said on Tuesday.
The rise in China, which consumes a third of the world's lead, exceeded a 16 percent rise the same month on the London Metal Exchange MPB3, where the metal price was $1,122 on Tuesday.
It marks a turnaround after Chinese prices lost nearly half their value between last September and early December on reduced demand triggered by the global financial crisis that spurred Chinese lead smelters to cut production.
"Many small smelters have shut down," said a sales manager at Yuguang Gold and Lead (600531.SS), the country's top producer of lead. "And battery makers are buying more lead."
Battery makers had cut lead purchases in the fourth quarter of last year because of volatile prices and had used up their stocks of the metal, he added.
"Demand for batteries is improving," said a purchasing manager at a large battery manufacturing plant in Hubei province that consumed about 140,000 tonnes of lead last year.
He said many car owners in China fixed their vehicles and changed batteries before the Lunar New Year, boosting battery consumption ahead of the festival, which falls on Jan. 26 this year.
Spot lead traded at about 12,000 yuan ($1,757) per tonne in Shanghai on Tuesday, up from 8,600 yuan on Dec. 5 but down from 17,600 yuan in mid-September last year.
But battery demand may wane and the price may fall after the Chinese New Year as car sales fall, amid the weaker domestic economy, the manager said.
Passenger car sales in China fell 10.3 percent on the year in November, the third monthly fall last year and setting the stage for a possible double-digit decline in 2009. [ID:nSHA314290]
"The winter is always a good time for lead. This year, the main issue is lower supply," a lead trader in Shanghai said.
Xinling Refining in Lingbao city in Henan province shut its sole 100,000-tonne-a-year lead plant in early December because of low prices, a company director said.
"Another two smelters of the same size like us in the city closed a month earlier than us," he said, adding the firm would not resume production until mid-February because of tight supplies of concentrate.
Smelter officials said supply of lead concentrate had fallen as mines in northern provinces closed operations in the winter.
In the southwestern China's Yunnan province, small lead mines have also cut production on safety checks by local authorities.
The Yunnan government plans to support local lead smelters by offering to buy up to 150,000 tonnes of lead it will use to collateralise bank loans this year.
The plan is expected to hold up lead stocks for a year and to cut supply to the spot market in China.
Chihong Zinc (600497.SS), which produced about 90,000 tonnes of lead last year and has been invited to sell the metal to the Yunnan government under the plan, has not decided whether it will participate, a company official said.
"We were verbally told about the plan but have not received a document," she said.
She added Chihong would not hold up any metal for the Yunnan government's buying plan before it made the decision. ($1=6.83 yuan) (Editing by Clarence Fernandez)
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