25 Nov 2009 13:24

China's crude lead production standards may impact prices

Shanghai. November 25. INTERFAX-CHINA - China's Ministry of Environmental Protection (MEP) recently released new production standards for China's lead producers, which may impact domestic refined lead prices in the coming weeks, an analyst told Interfax.

According to an MEP announcement on Nov. 13, Chinese lead producers that use sintering machines to produce crude lead are required to have an annual production capacity of over 50,000 tons, effective on Feb. 1, 2010. "The policy will allow many sintering machines, which were suspended by the local government in Henan Province in August, to restart production next year and negatively impact domestic refined lead prices," Hu Yongda, an analyst from Beijing Antaike Information, told Interfax.

According to Hu, around 240,000 tons worth of crude lead production facilities have been suspended in Henan Province, the country's largest lead producing region, since August 2009. This is the result of stricter enforcement of Henan's environmental standards, following the lead pollution scandal in Shaanxi Province's Fengxiang county.

The use of sintering machines is considered an outdated technique in lead production, as they pollute more heavily than other methods. The Chinese government previously said that it will shut down all sintering machines used in China's lead production industry before the end of 2012.

"Many of the currently suspended facilities in Henan already contain sintering machines that amount to an annual production capacity of over 50,000 tons per year. We had an 80,000-ton crude lead production facility shut down," an employee named Li from Jiyuan Wanyang Smeltery Group Co. Ltd., a 160,000-ton lead smelter located in Jiyuan City, Henan Province, told Interfax.

However, Li said it is still down to local governments to decide whether smelters can restart facilities, and they will be backed by the central government.

"Refined lead prices will not fall significantly, as lead concentrate prices are very high. We are struggling to generate a profit right now. Domestic lead producers may have to reduce production, if lead prices drop dramatically," an employee surnamed Liu from Henan Zhicheng Gold and Lead Co. Ltd. told Interfax.

Benchmark spot refined lead prices on the Yangtze River Nonferrous Metals Market stood between RMB 16,000 ($2,343.46) and 16,200 ($2,372.76) per ton on Nov. 25.