Though lead prices have dropped by over 4 per cent month-on-month, the metal will likely gain over the next few months on demand strength, analysts have said.
On Tuesday, three-month lead was quoted at $1,955 a tonne on the London Metal Exchange. “Despite losses throughout June and July, August has seen lead rising significantly as the dollar weakened,” said research agency BMI, a unit of Fitch Solutions.
Stricter emissions standards for battery makers in China, which lowered the content of bismuth in lead that can be delivered against contracts on the Shanghai Futures Exchange, led to tighter supply, it said.
As Chinese traders struggled to find material to meet the new norms, July saw Mainland China become a net importer of refined lead for the first time after years of being a net exporter, propelling prices higher, the research agency said.
Market optimism
The World Bank, in its Commodity Outlook, said lead demand growth is set to pick up a tad in the remainder of 2024, primarily driven by a gradual recovery in automotive sector activity—particularly the production of hybrid and internal combustion vehicles.
“Approximately 85 per cent of lead demand stems from battery production, with two-thirds of this demand coming from the automobile industry; and over three-fourths of automotive demand reflects the predictable need for replacement batteries,” it said.
BMI said prices of lead, used in car batteries, ammunition, cable sheathing, lead crystal glass, radiation protection and in some solders, will remain supported in the coming months, as market optimism around lead supply and demand strengthens.
“Lead stockpiles on warrant at the Shanghai Futures Exchange declined to a low of 4,087 tonnes on August 28, 2024, the lowest level since November 8, 2018,” it said.
H1 output down
ING Think, the economic and financial analysis wing of Dutch multinational financial services firm ING, said lead inventories rose by 18 per cent week-over-week to 30,525 tonnes.
The International Lead and Zinc Study Group (ILZSG), an arm of the UN, said global production of the metal fell 0.8 per cent in the first half of 2024 mainly as a result of lower output in China and Canada, where a scheduled maintenance at Teck Resources’ Trail operations impacted production in the second quarter.
On the other hand, refined lead metal usage decreased 1.7 per cent due to fall in Europe and the US. China, India, Japan and Korea more than balanced the drop, ILZSG said.
During the first half, Chinese imports of lead contained in lead concentrates decreased by 10 per cent to 2,85,000 tonnes. Net exports of refined lead metal totalled 14,000 tonnes, a decline of 57,000 compared with the same period of 2023, the group said.
Price forecast
BMI said as refined lead demand in China accelerates in 2024, it expects China to remain an importer in the months ahead. “Lack of lead exports from China will create some pockets of market tightness in key demand centres such as Europe and the US,” it said.
Trading Economics website said lead is expected to trade at $2,018.30 per tonne by the end of this quarter. “Looking forward, we estimate it to trade at $1,917.71 in 12 months time,” it said.
BMI said, “We have maintained our lead price forecast for 2024 at $2,200/tonne, and expect the market to remain fairly balanced in the coming months. Prices have averaged $2,128/tonne in 2023, and $2,135/tonne in the year-to-date as of August 28, 2024.”
The World Bank, however, said average lead prices are expected to ease somewhat in both 2024 and 2025, as a steady increase in supply outweighs demand growth at the margin.
Weak supply growth
Global lead output is projected to grow steadily this year, increasing in Australia, Brazil, Russia, and the US, it said.
BMI said supply growth will be weak in 2024. “We forecast refined lead production to grow by just 1 per cent in 2024 after growth of 5.5 per cent in 2023.
“High energy prices and supply chain problems in the global auto industry have constrained the rebound in lead refinery production from the Covid-19 pandemic. While lead demand from the auto industry is starting to recover, energy costs will remain high for lead smelters, particularly in Europe,” the research agency said.
