Lead TCs also declined during September on the back of short-term market tightness, although movements have been far less extreme than for zinc. Domestic TCs remained stable, whilst import TCs dropped by $10-20/t to average $100/t for the month. Current market tightness in China has been caused by increased smelter output, but we forecast that the concentrates market will be in surplus in both Q3 and Q4, so this should be short lived. Chinese smelters continue to hold relatively high stock levels, and imports dropped again in August on the back of a narrower arb and lower TCs. With the lead arb narrowing slightly in September as prices came down and the negative silver arb widening as silver prices slumped on both the LME and ShFE, some smelters have been reluctant to place fresh orders at current TCs and few deals have been concluded. Increasing domestic mine supply and relatively high domestic TCs are also reducing the demand for imported material despite the economics remaining favourable. Similarly to zinc, smelters are expected to build higher concentrate inventories in late Q3 or early Q4 in preparation for the winter months, meaning demand for imported lead concentrates should increase over the next few months.
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