* Falling lead output seen in 2010 for first time in years * Low treatment charges, metal prices cut output By Polly Yam HONG KONG, July 21 (Reuters) - China's annual refined lead production may fall this year for the first time in at least a decade as concentrates are expensive and environmental checks stay tight, analysts and smelter officials said on Wednesday. A fall in China's lead output, the world's biggest, could trim a surplus of 60,000 tonne expected this year by 17 analysts in a Reuters poll. "(Annual) output may fall 5 percent this year," said Tang Chenghe, chairman of lead producer Anyang Yubei Gold & Lead in Henan province, China's top lead producing area. He said refined lead output was unlikely to rise sharply in the second half of 2010 over the first, thanks to insufficient supplies of concentrate. Treatment charges for concentrate imports were low, encouraging smelters to cut production, said Tang, adding that despite rising domestic concentrate production, demand exceeded output. "2010 output may fall by about 100,000 tonnes from 2009," a sales manager at a large lead smelter predicted, adding that production cuts to existing capacity were likely to offset output from new capacity this year. The top lead producing city of Jiyuan in Henan is home to 32 small lead refiners with annual capacity of 10,000 to 20,000 tonnes each, most of which have halted production for much of this year, and it is unclear when they will resume, smelter officials said. Production of refined lead, which includes primary and recycled lead, dropped an annual 7.1 percent in the first half of the year versus 20 percent growth a year ago. Annual output rose 16.4 percent last year to 3.87 million tonnes. More than 500,000 tonnes of new lead smelting capacity is expected to start production this year compared to 490,000 tonnes last year, Hu Yongda, analyst at state-backed research group Antaike estimated. But some of that new capacity may delay startup if treatment charges for concentrate imports stay low and lead prices remain weak, Hu said. LOW TCs Tang at Anyang said the firm had accepted a treatment charge of about $60 per tonne for concentrate imports, below its production cost. "We don't want to massively cut production (now) and I think (metal) prices may rise in the second half," he said of importing concentrate at low charges and of expected higher fourth quarter prices as lead consumption rises in winter. Battery making is the biggest consumer of lead in China and winter is the peak sales season for car batteries. Treatment charges are paid by overseas concentrate sellers to Chinese lead smelters to turn the material into metal and deducted from the sale price, based on London Metal Exchange lead. A fall in treatment charges typically raises the price of concentrate imports. The charges to China now were indicated at $30-$40 per tonne versus over $100 in May and $110-$130 in March, due to reduced supplies, traders and smelter officials said. The charges may fall further before the fourth quarter as Chinese lead smelters raise production for the peak consumption season, traders said. Hu at Antaike said weak domestic metal prices, falling near 6 percent so far this year, had spurred smelters to close outdated capacity this year. Beijing aims to phase out 243,000 tonnes of outdated lead smelting capacity by the end of 2010 and has tightened checks on lead smelters after several lead poisoning incidents last year. (Editing by Clarence Fernandez)

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