Column: China’s lead export boom helps rebalance polarised market: Andy Home – Reuters

A worker adjusts machinery used to extract lead and zinc from ore at a smelter owned by Lumbung Mineral Sentosa in Bogor regency south of Jakarta July 19, 2014. REUTERS/Darren Whiteside/File Photo

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LONDON, Jan 10 (Reuters) – China’s exports of refined lead continued to accelerate over the back end of last year, November’s tally of 41,000 tonnes marking the highest monthly total in over a decade.

Outbound shipments started picking up in August and the cumulative total over the first 11 months of 2021 was 89,000 tonnes.

That’s the highest level of exports since 2007, a historical comparison that comes with the important caveat that China imposed an export tax on refined lead in June of that year.

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The 10% duty constrained outbound flows over the last decade and until last year China had been a net importer since 2016.

The rare inversion of normal trade patterns is a reflection of the abnormal polarisation of the global lead market last year.

As Chinese stocks of lead ballooned, London Metal Exchange (LME) stocks dwindled. High physical premiums for lead, particularly in the United States, signalled a super-tight supply chain resulting from resurgent demand coupled with smelter closures.

China is now coming to the rescue of beleaguered buyers everywhere else, export flows acting as the rebalancing mechanism.

China's refined lead imports highest since 2007
China’s refined lead imports highest since 2007


China’s export volumes in November alone exceeded every yearly total since 2015, which attests to the dramatic nature of the trade inversion.

Outbound shipments have also been heading to highly unusual destinations. China hasn’t exported refined lead to the United States since the 2000s but shipped a combined 37,000 tonnes over October and November, according to China’s customs department.

Another 11,000 tonnes departed in November for the Netherlands, another extremely rare export destination.

The balance of China’s August-November exports was largely split between Taiwan (15,000 tonnes), South Korea (14,000 tonnes) and Vietnam (6,000 tonnes).

It’s worth noting that there are LME warehouses in both South Korea and Taiwan. South Korea’s Busan saw 6,425 tonnes of lead put on warrant in October and another 6,050 tonnes in November, while Taiwan’s Kaohsiung received 2,925 tonnes in October.

However, LME arrivals totalled just 1,100 tonnes in December, suggesting that much of what China has shipped has been absorbed into the physical supply chain or is still waiting to undock.

US physical lead premiums are still high and rising
US physical lead premiums are still high and rising


Port congestion and high shipping rates, particularly for containers used to ship refined metal, massively disrupted the lead market last year.

The United States has no domestic primary lead production capacity and the March 2021 closure of Clarios’ secondary recycling plant blew a hole in regional supply.

U.S. buyers found themselves at the wrong end of a freight-disrupted global supply chain and paying record premiums for their metal over and above the LME price.

Those premiums are still rising. Fastmarkets’ most recent assessment of the U.S. Midwest market for 99.97% lead stands at a fresh record high of 17-20 cents per lb ($375-440 per tonne), up from 15-18 cents in December.

It’s clear that what has left from China has yet to improve availability in the spot market, likely reflecting continued port log-jams and trucking issues.

There’s similarly little sign of alleviation in Europe’s physically stressed market. Indeed, the premium for 99.97% lead in warehouse in Northern Europe currently stands at $30-50 over LME cash, up from $20-30 at the start of December, according to Fastmarkets.

Europe is still feeling the impact of the closure due to flooding of Germany’s Stolberg lead smelter last July. The 155,000-tonne per year plant, owned and operated by Ecobat, remains out of action but expected to return after a rebuild in spring this year.

There are a lot of supply gaps to be filled, which is why LME inventory remains so low.


LME stocks of lead closed December at 54,375 tonnes, down by 59% – 78,800 tonnes – on the year.

The LME has fulfilled its function as the market of last resort with stocks tapped by desperate buyers.

That role, however, may also mean it’s the last in line to receive China’s exports.

The LME benchmark cash-to-three-months time-spread remains backwardated, although the cash premium has contracted from last August’s peak of $218.50 to $14.75 per tonne at Friday’s close.

Despite China’s hefty exports, there is still more lead in Shanghai Futures Exchange warehouses – 89,147 tonnes of it – than in the LME’s global warehouse network.

Together with Chinese lead production rising by 12.4% in the first 11 months of 2021, there is potential for China to remain a net exporter for some time.

The rest of the world certainly still seems to need the metal.

The opinions expressed here are those of the author, a columnist for Reuters

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Editing by David Evans

Our Standards: The Thomson Reuters Trust Principles.