China Oct metals output falls on financial crisis

Reduced demand and sharp price falls due to the global financial crisis spurred Chinese smelters to cut output in October, with copper falling 8 percent on the year, aluminium dropping 0.9 percent and nickel down 18 percent.

China, the world's top consumer of copper, produced 293,900 tonnes of refined copper in October, the lowest level since February this year and down 7.3 percent on the month, data released by the National Bureau of Statistics on Thursday showed.

"Lower output was due to production cuts. Low prices forced some smelters to slow production," Liang Zhigang, analyst at Minmetals StarFutures, said.

China Smelters Purchase Team, which groups major smelters, is considering joint production cuts, a manager at Tongling Nonferrous told Reuters on Wednesday. Such joint cuts would push down the country's refined copper output further.

The market was surprised by data showing a 49 percent year on year surge in lead output, and some wondered if it might be an error given Yuguang Gold shut a 100,000 tonne lead facility in October and other smelters have made plans to cut output since mid-September.

"Output should not be that big. Maybe there was a mistake," said a sales manager at Yuguang, the country's top lead maker.

The bureau said China produced 354,300 tonnes of lead in October, which rose almost 50 percent from the revised 237,800 tonnes a year earlier.

"We are highly sceptical of these numbers. Either they are double-counting or they have changed the scope of their coverage," Gayle Berry, analyst at Barclays Capital, said.

"We are certainly aware of some double counting in previous months, but there is also evidence that they capturing more data but haven't adjusted the historical numbers."

But am analyst at Antaike said increased lead production in October could be the result of higher imports of concentrate in late September to mid-October due to lower international prices.

"During that time, concentrate imports were profitable," the analyst said.
He added recycled lead production had also risen from last year and was included in the statistics.

According to historical data, China has never produced more than 300,000 tonnes of lead in a single month. However, collecting production figures from the country's fragmented lead industry is not easy given it is dominated by small producers whose production is fluctuates widely.

Zinc output rose 5.2 percent to 359,500 tonnes on the month and 3.6 percent on the year due to new capacity, even though smelters have slowed production at some existing capacity in the past few weeks.

"I am a bit surprised by zinc output. Why did smelter start new capacity while they cut existing capacity?" Liang at StarFutures said.

He said he believed zinc smelters' output cuts had been partly offset by extra output from new capacity.

China, the world's top producer of aluminium, lead and zinc, produced 1.09 million tonnes of primary aluminium in October, down 0.9 percent from a year earlier and 4.7 percent less than the previous month.

Output is falling as more capacity shut this month, including 720,000 tonnes at Chalco.

Nickel production fell 18 percent from a year earlier and 9 percent from the previous month to 8,643 tonnes in October, as the country's top producer Jinchuan Group cut 20,000 tonnes of metal output this year.

Tin output in the world's top producer of the metal surged 61 percent on the month and 24 percent on the year to 16,239 tonnes in October, even though China's largest tin producer Yunnan Tin is cutting output 30 percent in the fourth quarter.

"Other tin producers may not cut production because demand remains strong," a soldering tin producer in Guangxi said.

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