Like many other metals, lead prices have also headed northwards over the past year. From about $1,700-$1,800 a tonne a year ago, prices on the London Metal Exchange have moved up 25-35 per cent to $2,200-$2,300 a tonne now.

The last time lead prices touched these levels was in mid-2014, although a multi-year high of almost $2,900 a tonne was seen in April 2011.

In India, MCX spot prices have mirrored international trends, with prices presently ruling around ₹150-160 a kg compared with ₹110-120 a kg a year ago.

One of the reasons for the price rise was the higher-than-expected increase in demand for lead in 2016 (over 2015) across Europe and the US. In early 2016, the International Lead and Zinc Study Group (ILZSG) forecast European demand to grow 3.5 per cent mainly due to anticipated rises in the Czech Republic, Italy, Spain and the UK. However, it grew much faster, at 8.7 per cent.

Similarly, after a 5.2 per cent contraction in 2015, a partial 1 per cent increase in demand for refined lead was anticipated in the US, where usage actually grew 3.6 per cent.

Lead prices also found support from US President Donald Trump’s push for infrastructure development to accelerate economic growth and employment.

Chinese push

Likewise, China’s focus on infrastructure projects in segments such as rails, roads, waterways and airports also fuelled prices for several metals. Lead, which is used in cable sheathing and making ammunitions, pigments, batteries, etc, was no exception.

China has announced plans to spend over $720 billion from 2016 to 2018 on transport projects. Double digit growth in automobile sales in the country in 2016 also increased the demand for batteries.

Thanks to these factors, China, which saw a sharp 18 per cent drop in refined lead usage in 2015, cut its fall in 2016. Demand contracted just 1.6 per cent in 2016. China is the biggest consumer of lead in the world, accounting for about 40 per cent of global usage.

Had global refined lead production dropped in 2016, the price rise would have been much sharper. But, even as global refined lead usage increased 2 per cent in 2016 to 11.082 million tonnes, global refined lead production inched up by 2.4 per cent to 11.093 million tonnes. Thus, lead signed off the year with a surplus of 11,000 tonnes.

Outlook

In the estimates put out in October 2016, ILZSG said it expects global demand to show 1.3 per cent growth in 2017.

Going by the full year usage figure of 11.082 million tonnes for 2016, a 1.3 per cent growth implies demand of 11.226 million tonnes for 2017.

In China, strong growth in vehicle production and sales is expected to continue to balance declining demand for lead-acid batteries in the e-bike sector, which have been replaced by lithium-ion batteries. It is anticipated that Chinese lead usage will rise 1.1 per cent in 2017. Demand in Europe and the US is expected to continue rising as well.

India scene

Refined lead usage in India grew 5.6 per cent in 2016, next only to Europe and the US. With benign borrowing costs and more income in the hands of both urban and rural consumers, domestic automobile sales will likely look up further this year.

This implies good demand for batteries, both from auto manufacturers and retailers who sell replacement batteries.

Industrial/UPS/inverter batteries used in homes, telecom towers and railways will keep demand going as well.

However, global production is also expected to increase adequately to meet the rising demand, with the ILZSG estimating a global surplus of 23,000 tonnes for refined lead in 2017. This implies that there may not be any sharp spikes in lead prices this year, be it international or domestic.

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