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China's lead prices fall 5% in May on eurozone fears

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Chinese lead prices fell 5% in May, as concerns over the eurozone debt crisis weighed on prices.

On the Shanghai Futures Exchange (SHFE), the benchmark July lead contract lost 805 yuan ($133) over the month to stand at 15,030 yuan on May 31.

"The rising possibility that Greece may quit the eurozone, combined with the bank crisis in Spain, have led to more and more concerns about the eurozone, as you can see from big falls in London Metal Exchange lead prices," Long Lizhi, lead analyst of Jinrui Futures, said.

Metal prices have also been hit by the slowdown in manufacturing activities in many countries over the past month, market participants said.

Large falls in the LME lead price have, however, spurred local players to import refined lead or lead concentrate, although cautiously.

"People are indeed buying LME lead, but they are very wary as lead prices may fall further," Long said.

On the Changjiang Nonferrous market, spot lead was trading at 15,100-15,200 yuan per tonne at the end of May, sharply lower than a range of 15,650-15,800 yuan per tonne in the last session of April.

Spot market transactions remained slow as more lead-acid battery makers turned to refined lead makers for raw material.

Lead-acid battery making accounted for about 70% of China's lead consumption last year.

"Our survey shows that 19 out of the 21 lead traders who responded have reported decreases of up to 30% year-on-year in their trading volumes this year," Zhang Shu, lead analyst of Shanghai Metal Market (SMM), said.

Zhang predicted lead demand would improve in the second half, when battery making enters its busiest season.

"The surviving lead-acid battery makers [after last year's government clampdown] are increasing their capacity to seize larger market shares, and the new capacities will be released as consumption steadily grows and exports recover," she said.

On the supply side, China's daily lead output rose by 6.9% month-on-month to 11,933.33 tonnes in April, reflecting a higher utilisation rate of 64.4% for the month, 5.5 percentage points higher than the previous month, according to SMM.

Total lead output in April was 358,000 tonnes, down 3% year-on-year, but up 3.5% month-on-month, according to the National Bureau of Statistics.

China's imports of lead ore and concentrate fell 8.9% month-on-month in April to 134,560 tonnes, 0.2% higher year-on-year.

The increasing price parity between LME and SHFE may lead to more imports of refined lead and lead concentrates in May and June, according to analysts.

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