The Hindu Business Line : Lead may rule firm on demand, low stocks

DOMESTIC lead metal prices are expected to rule firm for the rest of theyear following robust demand from the domestic automotive batteries sector, depleting LME warehouse stocks and firm global market trend.

Lead prices have increased by 15 per cent or Rs 7 per kg to Rs 54 per kg since ruling at Rs 47 per kg at the beginning of the year.

"Domestic prices are ruling higher in tandem with firm LME trend," a local importer said.

At the London Metal Exchange (LME), lead metal prices were up around 17 per cent or $129 a tonne at $880 a tonne during the weekend from $751 a tonne at the start of the year. Warehouse stock at LME declined to 34,150 tonnes on Friday from 1,08,975 tonnes at the year beginning, down 68.24 per cent.

Lead is a ductile, non-corrosive metal and is a by-product of zinc or silver.

"About 75 per cent of total demand is from the domestic battery industries. Demand is growing at the rate of 6-7 per cent per annum and will continue to grow in the near future. Annual demand for lead is nearly 1.60 lakh tonnes," a leading metal analyst said.

Supply is met through primary as well as secondary output and balance, through imports. The domestic supply is restricted to 55,000 tonnes. Out of this, Hindustan Zinc Ltd (HZL) supplies 35,000 tonnes per annum. Nearly 25,000 tonnes is supplied through the secondary output and the balance comes via import route, industry sources said.

HZL, the only producer of lead, plans to expand smelter capacity of refined lead from present 35,000 tonnes to 85,000 tonnes a year, at an estimated cost of Rs 95 crore. The enhanced capacity will be ready for commercial production by July 2005.

Its main use, accounting for 75 per cent of world consumption, is in the manufacture of lead-acid batteries used to provide power in numerous situations. Other uses include protective shielding from radiation and in building applications.

Over the last 10 years, the use of lead in batteries worldwide has increased at almost 4 per cent per annum. This reflects continuing growth in the world's vehicle fleet, with rapid growth in Asia, particularly in China, in more recent years.

In addition, the use of lead-acid batteries in telecommunications and IT networks as back-up power has expanded significantly in recent years.

"Future prospects for use of lead-acid batteries in vehicles look bright," the analyst said.

The global lead deficit projected for the year 2004 widened further at 63,000 tonnes from 20,000 tonnes in 2003, according to Barclays Capital.

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