World Mineral Production - NERC Open Research Archive - Natural ...

China remains the single biggest influence on the world lead
market. The Chinese Government removed the 13 per cent
export rebate on lead metal in September 2006, and
subsequently imposed a 10 per cent export tax on refined lead
on 1 June 2007. Chinese exports declined partly due to these
changes in taxation. But also because of burgeoning domestic
demand for lead-acid battery production and production at
Chinese smelters was cut due to lead concentrate supply
problems. China is now a net importer of lead concentrate
which further fuelled the price rise. In July, Macquarie Bank
speculated that smelter output cuts had lead to a global panic
which caused the observed price rises (Mining Journal, 6 July
2007).
By September 2007, China’s exports of lead were at their
lowest level for seven months, 74 per cent down, and exports
for the first nine months of 2007 were half the level of the
equivalent period in 2006. Overall, China’s reported
production was down almost 11 per cent, contributing to a
worldwide shortage (Hinde, 2007). By December China’s lead
exports continued to fall by double-digit rates in December,
according to the General Administration of Customs. Refined
lead exports fell 77 per cent year-on-year to 13 152 tonnes in
December. This took lead exports to 235 758 tonnes in 2007, a
56.1 per cent decline from the previous year. China’s lead
exports have continued to decline since a 10 per cent export
tax was introduced last June.
September saw further rapid price increases, driven by
increased buying in the wake of a fire at Xstrata’s concentrator
at their Mount Isa Mines in Queensland, Australia. The fire
resulted in Xstrata losing up to 20 000 tonnes of lead
concentrate production, which in itself is not that significant
an amount, but again demonstrates how tight the market had
become in the final quarter of 2007 (Meir, 2008).
The US Federal Reserve also cut interest rates by 50 basis
points on 18 September 1 , stimulating demand in the US and
raising the price towards its maximum. The possibility of
1 http://www.federalreserve.gov/fomc/fundsrate.htm
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US$ per tonne
4500
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0
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Lead Price Trend
Average Lead Cash LME Daily Official prices. Source: Metal Bulletin 2008
Oct-2003
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recession in the US, an economy still some seven times greater
than China, could still be the controlling factor on the long
term commodity price (Meir, 2007).
In the final two months of 2007 lead prices saw a significant
reduction (although stabilising during December) as stocks
rose steadily, doubling from the low levels reported in
October. Chinese refined lead exports in November also rose
to their highest level since June. With the prospect of exports
resuming from Ivernia’s Magellan Mine prices remain are
likely to remain depressed. This period also saw declines in
the prices of other base metals following a period of sharp
decline in physical premiums 2 beginning in May 2007
although this had stabilised across the USA, Europe and Japan
over the last quarter of 2007 (International Mining online,
January 2008). Given the strong increases in freight rates over
the previous 12 months (which saw many more than double),
the fall in premiums could have a significant impact on both
producers and traders.
Analysts now predict prices between US$2000 and US$2600
per tonne in the early part of 2008 (Meir, 2008).
Industry events in 2007
Oct-2006
The year saw increases in both supply of lead to the market
and demand, above the long-term trend. Lead price rises have
also driven mining companies to expand their exploration and
production activities.
China became an even more influential force on the world
market as the world’s premier lead producer and consumer. In
2006, China produced 2.4 million tonnes of refined lead, of
which a fifth was exported. However, exports dropped during
2007 both due to increased domestic demand and changes in
taxation Increasing levels of Chinese investment and
ownership of mines especially in Asia, Africa and Latin
2 The physical metals premium is the price that metals purchasers are
required to pay (freight, insurance, warehousing and logistical costs
etc. in addition to the LME price) to receive delivery of their purchase
at a specified location.
Jan-2007
Apr-2007
Jul-2007
Oct-2007
Jan-2008