China lead smelters delay term ore import orders

By Polly Yam

HONG KONG, Dec 7 (Reuters) - Chinese lead smelters are holding back on their annual orders for concentrate imports next year due to worries that Beijing will raise a tax on metal exports, smelter officials said on Friday.

Lower buying by lead smelters in China, the top lead producer in the world and a major importer of lead concentrate, has been driving up ore processing fees in the international market, traders said.

"We have not signed. The tax may change," said a trader at Yuguang Gold and Lead Co Ltd (600531.SS), the top producer of the metal in China, referring to next year's term imports of concentrate, the main material for primary lead production.

A senior executive at Anyang Yubei Gold and Lead said many smelters were unwilling to place orders for term concentrate imports next year because of the uncertain tax policy.

Beijing is considering raising tax on exports of refined lead to 15 percent from 10 percent next year as part of its latest effort to cool investment in the resource-intensive lead industry and to cut outflows, smelter officials have said.

Higher export taxes may encourage more refined lead to stay home and that could weigh on local prices, which is likely to force smelters to cut production.

China normally imposes new taxes which become effective at the start of the calendar year.

The Anyang executive said some 700,000 tonnes of lead smelting capacity were not operating at full rates due to the 10 percent export tax and high prices of imported concentrate.

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"What can smelters do if Beijing raises tax to 20 percent or 30 percent? Smelters would not sign term imports amid such uncertainty," the executive said.

Chinese lead smelters are seeking treatment charges of over $400 a tonne for term concentrate imports next year versus $110 to $120 this year, according to traders.

Overseas sellers pay the fees to Chinese smelters for processing the concentrate into lead, and then deduct the fees from the sale price, based on world lead prices. Normally the fees rise when demand is weak, making concentrate cheaper.

"Some sellers may pay (those) fees to get orders," a trader at one international trading house said, referring to term fees of $350 to $400 next year.

Smelters may hold back on the term import orders until January, the trader said.