Lead prices will likely rise in the long-term as the market has begun to tighten with China slowing exports of refined lead. In addition, a drop in supply of lead concentrates and a cut in battery scrap have affected the metal’s availability, say analysts. 

“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. We expect prices to start edging higher by mid-2024, as the flow of  Chinese refined lead exports slows,” said research agency BMI, a unit of Fitch Solutions.

“From the perspective of raw material supply, the supply of lead concentrates and scrap materials is limited. The price reduction of battery scrap dragged down the recycling volume,” said Shanghai Metal Market (SMM) News.

“High energy costs (for European smelters) and stricter environmental regulations will also constrain refined lead production growth. As a result, we forecast prices to rise over the coming decade,” said BMI.

Up 3.5% year-to-date

Lead three-month futures on the LME ruled at $2,103.65 a tonne on Tuesday. The metal has gained over 3.5 per cent since the beginning of 2024. On the Shanghai Futures Exchange, lead for delivery in May ended at 15,960 Chinese yuan ($2,217.31) a tonne.

In October 2023, the World Bank’s Commodity Outlook forecast that lead prices will remain relatively stable in 2024 and 2025 amid a steady increase in supply. “Mine production growth is expected to accelerate in 2024 and grow moderately in the medium-term,” it said. 

 According to preliminary data compiled by the International Lead and Zinc Study Group (ILZSG), a UN arm, global supply of refined lead metal in 2023 exceeded demand by 92,000 tonnes. Inventories reported by the London Metal Exchange (LME), Shanghai Futures Exchange (ShFE), producers, merchants and consumers rose by 123,000 tonnes and totalled 447,000 tonnes at the year end. 

BMI said though the global lead market was oversupplied in 2023, “this has started to change in 2024”. Steady demand growth, notably in China and India, will start to outpace supply growth, which will be constrained by tighter environmental restrictions on new lead smelters, it said.

Output growth to be subdued

The trend will likely continue in 2025 as production growth will be slow, in part due to limited reopening of smelters in Europe following closures in 2022. “Persistently high energy costs in the region will maintain pressure on smelters’ margins,” BMI said.

The World Bank concurred saying outside of China, high borrowing costs could reduce demand for metals, such as lead and tin, which are intensively used in industry and consumer durables.

BMI said refined lead production growth will be subdued in the coming years. “Global refined production contracted by 1.7 per cent in 2022, grew by 5.5 per cent in 2023 and we forecast growth of 1.0% in 2024,” the research agency said.

ILZSG said global output of refined lead metal rose by 2.8 per cent in 2023, mainly as a consequence of increases in Australia, China, Germany, India and the United Arab Emirates, where new capacity has recently been commissioned. 

Downside risks

“The output of refined lead metal from secondary (recycled) raw material accounted for 66 per cent of global production in 2023, a similar share to that recorded in 2022,” it said.

The World Bank said about 85 per cent of lead demand is for batteries, of which half is for replacement automobile batteries. “Thus, lead is cushioned against cyclical demand declines that affect other industrial metals,” it said. 

BMI said lead demand will grow in the long term, despite the shift in auto sales towards electric vehicles (EVs).

The research agency said the weak global economy presents “strong downside risks” to its view.