Having gone on record a little under two months ago that the lead market had moved into over supply and prices would continue to come off we were a little alarmed to read that our predictions could be thrown into doubt by a recent article drawn from a Bloomberg report . According to this and another report the e-bike or electric bike market in China is consuming 20% of the country’s lead consumption and is rising from 13 million units in 2007 to 16.3 million this year and will be over 23 million by 2010. How could I have missed this burgeoning new market for lead, was I asleep? In a panic I whipped out my calculator and started checking these figures. Each battery uses about 5 kgs but the trend is towards larger machines which will use up to 10 kgs, so on average lets say 8 kgs at present. A little more digging revealed the battery life is only 1.5 to 2 years, so the after market is huge. Assuming your e-bike doesn’t get crushed under a 20 ton truck on China’s rapidly filling highways you will need to replace the battery let’s say every 18 months. China will produce 2.8 million tons of lead this year according to Standard Bank. Calculator is no good, we need a spreadsheet, – we have replacement demand lagging new build but rising with it over time. Five minutes later I have a percentage for e-bike battery consumption in 2008 ” 4.82%. Mmm it’s a bit less than 20% and I suspect closer to reality but even my 4.82% rises to 7.23% next year and 9.6% in 2010 which becomes a significant figure when you consider China will be producing some 3.3 million tons per annum of lead by then.
Will it lift prices? We still think not, lead stocks are rising even faster and the market is due to be in surplus to the tune of 356 thousand tons this year and 709 thousand tons in 2009 ” according to our goods friends at Standard Bank. Since our May article, the price has fallen from $2300/ton to $1700/ton on the LME , so far so good. There is only one thing we like more than finding a new market for metals, and that’s not being proved wrong!