The lead market gets comparatively little coverage compared to copper, aluminum and even zinc, yet global consumption is expected to hit 10.56 million tons this year and valued at US$ 22.2 billion, according to Businessweek.
Just six months ago, analysts were predicting a supply shortfall for next year, but in the meantime exchange inventories have risen, by 32 percent since October or around 79,000 tons, to nearly 324,000 tons on the LME.
Demand for lead from manufacturers of industrial batteries will jump 10 percent, compared to growth of 4.5 percent across all applications, the article states. Industrial batteries now account for 33 percent of all lead consumption, a rising proportion as new uses are found in mobile phone masts, data centers, and UPS’s, etc.
Indeed, batteries of all sorts are the major applications for lead products, soaking up some 85 percent of production, compared to just 27 percent in 1960, but the rise has come not just from automotive vehicles — China’s e-bike craze has created a whole new market that barely existed ten years ago.
The International Lead Zinc Study Group’s recent reports suggest metal availability is tightening. First-half 2012 supply exceeded demand by just 48,000 tons, while the World Bureau of Metal Statistics puts the figure at just 17,200 tons.
Both agree the surplus is shrinking. Reports suggest scrap battery prices have dropped recently from 42-54 cents/lb to 40-41 cents/lb, but this is still above the 35 cents/lb level of earlier this year. Meanwhile, miners have to move ever-larger volumes of ore just to yield the same refined tonnage of lead — ore grades have dropped from 3% ten years ago to 2% today, and falling.
With lead produced as a co-production with zinc, and the zinc market being in significant surplus, new mine expansion is struggling to keep up with rising demand.
In spite of a global recession, some industries are still expanding; automotive is one that is generally doing well globally, even if it faces overcapacity in Europe, and another sector is mobile phone masts. Fourth-generation wireless is being rolled out across Europe, Middle East and Africa, requiring 8.5 million new batteries containing about 700 million pounds of lead, according to Businessweek.
Shortages could appear as early as the end of this year, according to Barclays, and Standard Bank reports some market tightness is already developing in nearby forward positions as new stocks are added in Europe, but depleted in Asia and North America.
The lead market may be one to watch, especially for consumers with contracts to fulfill in 2013. If the tightness proves more pronounced than currently expected, prices could move higher — however depressed the rest of the base metals sector appears.