China may raise tax on exports of refined lead
By Polly Yam
NANJING (Reuters) - China, the world's top lead producer, is considering raising the tax on exports of refined lead to 15 percent next year from 10 percent, a move that is likely to reduce outflows and could drive up world prices, smelter officials said.
A fall in exports, which had already dived 54 percent in the first 10 months of this year, may force Chinese lead smelters to cut production.
"Beijing has informed large smelters that it is considering to raise taxes," said a manager at one Henan-based lead smelter.
Zhou Guobao, director of the lead and zinc department of China Nonferrous Metals Industry Association, said he was aware of speculation about a tax hike on lead exports but said he did not know when or whether Beijing would change the tax.
"If the tax will be 15 percent, LME prices would rise," Zhang Changhai, an analyst at state-owned research group Antaike, told Reuters on Sunday on the sidelines of a lead and zinc conference organized by his company in Nanjing.
He said the tax hike would force Chinese smelters to cut production next year but did not provide the scale of output reduction.
Chinese smelters have already slowed operations in the second half of this year because of high prices of imported concentrate, which is the main material for producing primary lead. China does not produce enough to cover its own demand.
World lead prices, the base price for imported concentrate, hit a contract high of $3,890 a tonne in October this year due to fewer exports from China and shipment disruptions from Australia's Magellan mine following environmental concerns. Since then, the price has dropped below $3,000 in line with declines in the metals complex of the London Metal Exchange.
But Chinese smelters have not been able to take advantage of strong world prices since June, when Beijing imposed a 10 percent tax on exports of refined lead.
Executives of Chinese lead smelters who attended the Nanjing conference were not willing to book term concentrate imports next year amid fears that export taxes would rise, affecting their production, a trader at one international trading house said.
Without the tax hike, Antaike sees China's refined lead production rising 11.7 percent from this year to 3.14 million tonnes in 2008, of which about 975,000 tonnes will be recycled metal. Output is expected to rise to 3.5 million tonnes in 2010 of which 1.1 million tonnes will be recycled lead.
But officials at secondary lead plants said projected 2008 recycled lead output might be underestimated given that more than 400 small plants were using primitive production methods to make the metal from used batteries.
Refined lead, the main material in manufacturing batteries for cars and electric bicycles, is also recycled from used batteries.
China's consumption of refined lead is expected to rise 10.3 percent to 2.79 million tonnes next year, which will create a surplus of about 350,000 tonnes, Antaike predicts.
(Reporting by Polly Yam, editing by Ken Wills)