All base metals inventories on ShFE fell this week

* Lead scrap shortage reduces secondary lead output

* Steel inventories fall for third straight week

By Mai Nguyen and Min Zhang

SINGAPORE/BEIJING, April 3 (Reuters) – Lead inventories monitored by the Shanghai Futures Exchange (ShFE) fell for a sixth straight week to a 28-month low as buyers sought stocks in exchange warehouses due to a lack of recycled metal in China, data released on Friday showed.

ShFE lead stocks PB-STX-SGH dropped 38% this week to 8,656 tonnes, their lowest since the end of November 2018 and the biggest weekly drop since the week ended October 26, as lead recyclers cut output due to a lack of input material during China’s lockdown to contain the coronavirus pandemic.

“In quarantine periods, scrap just doesn’t get collected — or generated from industrial activity — and hence the call on primary supply is higher than expected,” said Colin Hamilton, head of commodities research at BMO Capital Markets, referring to lead produced from lead ore.

A survey of 50 recycled lead producers across China from consultancy Mysteel showed their output in March leapt 203.2% from February to 149,500 tonnes, while output in April is expected to rise further to 220,500 tonnes, suggesting the shortages will start to reverse.

The producers account for 83% of China’s waste battery processing capacity of 8.38 million tonnes, Mysteel said.

“Almost all the secondary smelters were out of production until late February. The short supply of battery scraps restrict the utilisation of secondary lead smelters,” said analyst Dina Yu of CRU Group.

“The secondary lead output is increasing slightly, while demand for lead was somewhat flat (compared to last week). However, it’s still unable to meet the demand, so the stocks continued to drop,” Yu said.

Inventories of all other base metals fell slightly in warehouses tracked by ShFE, data on Friday showed, as China slowly restarted businesses after containing the virus there.