* Fund would be financed by tax on lead-acid battery makers
* Part of government battle against pollution
* Slower electric bike output hurting lead demand
By Polly Yam
HONG KONG, Oct 10 (Reuters) - China is considering setting up a fund to subsidise some refined lead makers that use recycled lead-acid batteries to produce the metal, three industry sources said.
Beijing hopes that by offering subsidies to larger, well-equipped processors it can reduce environmental damage caused by recycling the toxic metal at smaller firms.
China's government this year launched a "war against pollution", trying to reverse the damage of decades of untrammelled economic growth.
Chinese authorities including the finance and industrial ministries as well as the National Development and Reform Commission are seeking views from industry bodies on a possible fund, the sources said.
The country is the world's top producer and consumer of lead, with recycling accounting for nearly 30 percent of its refined output in 2013.
The fund would be mostly financed by a new fee paid by makers of lead-acid batteries, commonly used in electric bicycles and vehicles.
One of the sources, Zhang Weiqian, an analyst at state-backed research firm Antaike said the subsidies would likely be given to large recycled lead producers currently not running at full capacity due to high prices for used lead-acid batteries.
A senior executive at a large lead-acid battery manufacturer in the southern province of Guangdong said the government was highly likely to set up the fund. He did not want to be identified due to the sensitivity of the matter.
The China Battery Industry Association wants the government to give more information about how other countries handle used lead-acid batteries and how the fund would work, said Cao Guoqing, vice general secretary of the industry body.
It was unclear when any fund would start.
ON YOUR BIKE
Many refined lead producers have been hit as growth in demand for electric bicycles eases as the economy slows, said trading sources and Zhang at Antaike.
"Demand (for lead) is going through something of a winter at the moment. Appetite from electric bicycle producers is very bad," said a manager at a large lead producer. He added that weak demand was forcing some lead plants to close.
Chinese production of electric bicycles may start falling in 2015 after rising rapidly in the past few years, said Zhang at Antaike.
Official data showed medium to large factories produced 12.27 million electric bicycles in the first half of 2014, down 1.5 percent from a year earlier. About 181 million electric bicycles are estimated in China, according to a report on the China Bicycle Association website.
Antaike expects China's lead consumption to rise 4 percent to about 5.1 million tonnes in 2015 from the year before, compared to a 5-percent rise estimated for 2014.
(Reporting by Polly Yam; Editing by Joseph Radford)