Lead Output in China Climbs to a Record on Import Slump, Firm Auto Demand

Lead production by China, the world’s largest metals consumer, advanced to a record in August, as imports slumped and demand remained robust.

Output of the refined metal gained about 5.1 percent from a month earlier to 404,000 metric tons, the statistics bureau said today. That’s a monthly record, according to Jiang Donglin, Shenzhen Zhongjin Lingnan Nonfemet Co.’s research department manager. Production expanded by 2.4 percent in the first eight months to 2.65 million tons, the bureau said.

Lead, the second-worst performer on the London Metal Exchange after zinc, has fallen about 9 percent this year on concern that weaker growth in China, budget cuts in Europe and unemployment in the U.S. may derail the global recovery. China is the world’s biggest producer and consumer of the metal used in batteries.

“Battery demand was good as auto sales remained strong,” said Jiang. “We expect second half consumption to moderate.”

China’s lead output may exceed 4 million tons this year, Zhao Cuiqing, director of the lead and zinc department at the China Nonferrous Metals Industry Association, said at a Shanghai conference on Sept. 11. That compares with 3.9 million tons last year, when production gained 16 percent, according to statistics bureau data.

China’s imports of lead tumbled 92 percent to 10,847 tons in the first seven months of this year, according to customs data. The country may add 600,000 tons of smelting capacity in the second half of this year, data provider Shanghai Metals Market said at the same conference. Three-month lead futures traded at $2,205 a ton at 1:54 p.m. in Singapore.

‘Slightly Oversupplied’

“Production capacity is increasing and the jump in domestic output helps to offset the decline in imports, leaving the market balanced to slightly oversupplied this year,” Shenzhen Zhongjin’s Jiang said.

China’s passenger-car sales to dealerships increased 18.7 percent to 1.02 million units in August, compared with 13.6 percent growth in July, the China Association of Automobile Manufacturers said Sept. 9.

The country’s industrial output and imports accelerated last month, adding to signs that economic growth is picking up even as government curbed credit growth and property speculation and closed energy-intensive and polluting factories.

Still, China’s lead and zinc demand growth in the second half may slow from the first half, China Nonferrous Metals Industry Association’s Zhao said without elaborating. This is in line with a Aug. 26 Ministry of Commerce forecast, which was for slower consumption growth in the second half compared with the first half as car sales expand at a reduced pace.

Global Surplus

Global refined lead output was 763,300 tons in June, exceeding usage of 752,100 tons, the International Lead and Zinc Study Group said Aug. 24. The Lisbon-based group expects global consumption to be 9.3 million tons and production to be 9.41 million tons this year, it said in April.

The surge in China’s lead output will not trigger more exports of the metal and its products as the government is determined to control domestic energy consumption, said Zhao.

Higher output means greater demand for producers like Henan Yuguang Gold & Lead Co., the country’s biggest, to hedge their risks, according to Soochow Futures Co.

“Trading volumes for lead on the London Metal Exchange aren’t big, so we may see lead futures in China go the way of zinc, with domestic prices leading international prices,” said Soochow’s trader Jia Zheng.

China may introduce lead futures as early as December or before the Chinese New Year vacation in 2011, Zhang Yisheng, vice chairman of the China Futures Association, said at the conference.

To contact the Bloomberg News staff on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

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