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Lead Recyclers in China Idle Capacity on Costs, Antaike Says

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June 29 (Bloomberg) -- Lead recyclers in China, the world’s largest, have idled about 8 percent of capacity because of high input costs, according to a state-owned researcher.

About 100,000 metric tons of the country’s 1.2 million tons in annual lead recycling capacity have been suspended, said Hu Yongda, analyst at Beijing Antaike Information Development Co. China is the world’s biggest consumer and producer of lead, which is used mainly in batteries.

Lead prices in London have shed 25 percent this year, becoming the second-worst base-metal performer, as Chinese imports tumbled 85 percent. China accounts for about one quarter of the world’s recycled lead, according to the International Lead and Zinc Study Group.

“Lead-acid battery prices are very high, even for used ones, so the raw material costs are high and many recyclers are losing money,” Hu said in a phone interview from Beijing. Secondary lead production, including metal from recycling, makes up just over half of global total production, the study group’s figures show.

Lead prices in Changjiang, Shanghai’s biggest cash market, have fallen 6.9 percent this year, after gaining 36 percent last year as China’s $586 billion stimulus spending boosted imports.

Still smelters are not planning to cut output as domestic prices remain above the cost of production, said Hu, who estimates the average cost of making lead in China is about 14,000 yuan a ton. Chinese cash prices have risen from a nine-month low to trade at about 14,950 yuan a ton yesterday.

Refined Lead

“Those using imported concentrate may have idled capacity in the form of maintenance shutdowns, however those with access to their own mines are quite far from reducing output, especially if prices continue to improve,” Hu said. “Some smelters in Henan may be considering output cuts but we haven’t heard of any so far.” Henan is the country’s biggest lead-producing region.

China may produce about 3.7 million tons of refined lead this year, up 4.2 percent from last year’s 3.55 million tons, according to Antaike estimates, slower than last year’s 18 percent increase.

This will help reduce the global surplus and support prices, said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co. Global refined lead production will be 9.41 million tons this year, outpacing consumption of 9.3 million tons, according to the International Lead and Zinc Study Group. Lead production exceeded demand by 71,000 tons last year, the group said.

“The marginal producers may still be at risk of having to shut capacity,” said Pang.

Shares of Henan Yuguang Gold & Lead Co., China’s largest lead maker, have lost 26 percent this year as lead prices plunged on concern the European debt crisis may derail the global recovery and as China took measures to cool its economy. They traded unchanged at 15.61 yuan in Shanghai at 10:06 a.m. local time.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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