Chinese lead prices expected to keep firm in H1 2017
----Interview with Lu Qiang, General Manager Assistant of Jiyuan Wanyang Smelting Group Co., Ltd and General Manager of Shanghai Trade Company
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- With registered capital of RMB280 million and total assets of RMB6 billion, Jiyuan Wanyang Smelting Group Co., Ltd was founded in 1995. The company has a staff of around 3,500 at present. ‘Wanyang’ brand lead ingot became delivery brand on Shanghai Gold Exchange and won famous trademark in Henan province. ‘Wanyang’ brand silver became the delivery brand on Shanghai Future Exchange, Shanghai Gold Exchange, and Tianjin Precious Metals Exchange.
- Asian Metal: Mr Lu, thank you for accepting the interview of Asian Metal. Could you please give us a brief introduction about the main business of your company?
- Mr Lu: Our company has 5 production factories and 9 investment companies. The company mainly focuses on the production of lead ingot, silver, gold and other metal products. The annual capacity of lead ingot, silver and gold are 260,000t, 350kg and 1kg respectively. Meanwhile, we produce sulfuric acid, zinc oxide, antimony and bismuth etc.
- Asian Metal: According to Asian Metal, the supply of lead concentrate was very limited recently, and some lead smelters reduce or halt production. Whether adjust the production plan in your company?
- Mr Lu: Our company conducted maintenance for one production line on October 28th and resumed production on November 20th. We will keep the full production and not adjust the production plan in the following months.
- Asian Metal: How is reserve condition of lead concentrate in your company? Do you think when can ease about the lead concentrate supply tension?
- Mr Lu: Currently, We hold around 50,000t of lead concentrate, which can support production for around two months. There is no question for our company about the supply of lead concentrate in the following months. Our company purchases around 70% of lead concentrate in the Chinese domestic market and 30% from foreign market. In my experience, the supply of lead concentrate will continue to keep tight in the first half of 2017 and it may ease in the second half of 2017.
- Asian Metal: Seen from present supply condition of lead concentrate, we predict many lead smelters will be forced to halt production next January and February. What's your opinion on that?
- Mr Lu: I agree with your viewpoint. The raw material supply is tight, and the reduction of output is inevitable. We predict that lead smelters will resume production in the third quarter of 2017. If a large number of secondary lead smelters resume production next year, lead prices may retreat.
- Asian Metal: Lead price continued to increase in the domestic market recently and broken through RMB17,000/t, which reached the top over the past nine years. What do you think of the trend of lead prices throughout the year?
- Mr Lu: The supply of lead concentrate is limited, and demand from downstream consumers keeps strong. The prices will continue to jump and the prices on SHFE may impact above RMB19,000/t, and lead prices will follow suit in the Chinese spot market.
- Asian Metal: The environmental inspection has been stricter in China in recent years, and most three-no-secondary lead smelters were forced to halt production or close. However, supported by sharp increase of lead prices, some three-on-enterprises resumed production in October. How much impact for demand and prices of lead ingot?
- Mr Lu: As I know, many secondary lead smelters do not resume production currently and the increase of output is limited. In addition, currently, the tax system checks VAT invoice, their output will not increase sharply. At present, although some three-no-enterprises resumed production, it had limited effects on demand and prices of lead ingot. If the environmental inspections and checking invoice relax, the increasing output of lead ingot will restrain lead prices increase.
- Asian Metal: impacted by shortage of raw materials and strong demand from battery industry, lead prices will continue to keep firm within 2016. Could you please share your opinions on lead prices trend next year?
- Mr Lu: The lead prices will emerge after the former high-low trend next year. I predict the prices will reach the top point of RMB18,500/t supported by shortage of raw materials and decrease to RMB14,000/t in the second half of 2017 due to weak demand. The lead prices will fluctuate sharply next year. We think the outputs of battery overdrawn in 2016, and the demand from battery industry may reduce next year. Therefore, when demand for lead ingot is not strong and supply for lead concentrate keeps sufficient, lead prices will move down in H2 2017.
- Asian Metal: What are the business directions for your company?
- Mr Lu: We will maintain the present status and produce steadily next year. We may increase around 50,000-80,000tpy of secondary lead output. Although the supply of recycled lead battery keeps in a short, we cooperate with Chaowei Power and use lead powder exchanging recycled lead battery.
- Asian Metal: Thanks for your sharing and your support for Asian Metal. Wish your company a better future.
- Mr Lu: Thank you.
