China Sells Less Than Half of Lead Offered From State Reserves in Auction

China, the world’s largest lead consumer and producer, sold less than half of the metal on offer from state reserves as a high floor price and remote storage locations may have deterred buyers.

The State Bureau of Material Reserve sold about 16,535 metric tons out of 34,500 tons offered at an average price of 17,030 yuan （$2,564） a ton through public auctions on Nov. 16, the National Development and Reform Commission said on its website. The highest price was 17,080 yuan, and the lowest 17,020 yuan.

The reserves regulator has sold aluminum, zinc, paper pulp, magnesium, sugar, cotton and corn from state inventories this year in an effort to ease shortages and curb price gains. High commodity prices helped push China’s inflation to 4.4 percent in October, the fastest pace in two years.

“The floor price is a bit high given some faraway storage locations,” Zhang Shu, an analyst at data provider Shanghai Metals Market, said by phone today. “Some bidders said transportation, for example from Gansu to Shanghai, is around 500 to 600 yuan, adding to the price, so it’s not economical.” The floor price was 17,000 yuan a ton, the NDRC said.

Some of the lead ingots were stored at warehouses in Yunnan, Gansu, and Heilongjiang provinces, according to an earlier statement posted on the NDRC’s website.

Prices Fall

Lead prices in Shanghai’s largest nonferrous metals market Changjiang were around 17,700 yuan a ton yesterday, compared with 18,000 yuan a ton on Nov. 16, the day of the tender.

The metal, used in car batteries, is the second-worst performer on the London Metal Exchange this year. The three- month contract reached a 10-month high of $2,650 a ton on Nov. 11, and dropped 0.4 percent to $2,257 a ton at 10:40 a.m. in Shanghai.

Some provincial governments in China started to limit power supplies to smelters from October in an effort to meet the energy-saving goal set by Beijing for the five-year plan ending 2010.

Still, “the impact of power curb on lead is very limited, with few smelters affected,” Hu Yongda, an analyst at Beijing Antaike Information Development Co., said by phone. “Besides, there are ample supplies on the market, so it’s not strange they didn’t sell much.”

The NDRC will auction a second batch of 117,000 tons of aluminum on Nov. 23 and Nov. 24.

--Helen Sun, Jing Jin. Editors: Richard Dobson, Jake Lloyd- Smith.