Lead prices may consolidate over the next few months as supplies rise

Refined lead prices gained nearly four per cent in the past week as inventories dropped, but the metal’s prices may have already peaked.

China’s SMM consulting said some lead smelters were carrying out the maintenance operations resulting in the inventories of ingots dropping. This supported a rise in prices but with secondary smelters resuming operations, they may come under pressure.

Though lead gained last week, it is down 4.72 per cent in the past month. Since the beginning of the year, it has gained over 16 per cent. During the weekend, lead for cash was quoted at $2,269 a tonne and its three-month contract at $2,289.

On Shanghai Futures Exchange (ShFE), lead for delivery in January was quoted 50 Chinese yuan ($7.83) higher at 15,380 yuan ($2,409) a tonne today. SMM said lead prices are expected to trade in the 15,000-15,450 yuan range this week.

Demand growth

According to the International Lead and Zinc Study Group (ILZSG), a body founded by the UN, demand for refined lead is expected to increase by 5.5 per cent this year to 12.39 million tonnes (mt) this year. Its usage in India, Brazil, Japan, South Korea and Mexico is expected to increase after a drop last year.

Fitch Solutions Country Risk and Industry Research (FSCRIR) said lead prices will consolidate during the current and the next quarters. Shortage in supplies should end during these two quarters as disruptions are likely to end.

Markets had ample supply this month with China beginning to increase its exports to countries such as the US that faced tight supply or issues such as high shipping costs. Fitch Solutions said China has turned into a net exporter of the metal in September this year from being a net importer since 2018.

Rise in mine supply

“China exported 15,545 tonnes of refined lead in September, which was the largest tonnage (shipment) since 2007,” FSCRIR said.

Lead inventories at the ShFE were three times of global warehouse inventories and this suggested potential for Beijing to export more lead in the coming months, it said.

ILZSG said lead mine supply was projected to increase 4.1 per cent this year to 4.81 mt with the output in China rising by 1.7 per cent this year. Global lead supplies would be driven by increased production from India, Australia, Bolivia, Mexico and Peru.

Fitch Solutions said since lead had performed strongly this year, and it was revising its price forecast for the year higher to $2,200 a tonne from $2,125 with the metal average $2,316 during November-December.

Surplus stocks

The rating agency said the surging vehicle prices will also begin to impact the rebound in the global automobile production over the next few months, thus stalling growth in lead demand.

ILZSG said it anticipates globally refined lead supply to exceed demand by 27,000 tonnes this year. Next year, it said, lead usage will increase 1.7 per cent to 12.60 mt and surplus would be 24,000 tonnes.

Fitch Solutions said it sees prices averaging $2,150 next year compared with its earlier estimate of $2,050. In the longer term, it expects lead prices to rise gradually with the marketing tightening.

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