Lead prices fell in May with the rest of the base metal complex, hitting a four-month low.
Last year lead was buoyed by expectations of mine shutdowns and firm demand from the China’s lead-acid battery industry. However, things haven’t quite panned out this way.
Lead is now 5% down year to date while sister metal zinc has scored 18% gains over the same period.
Demand for lead looks less appealing than zinc this year. Provisional data reported to the International Lead and Zinc Study Group indicate that lead is still in surplus, with world refined lead metal supply exceeding demand by 29,000 metric tons during the first quarter of 2016. Two factors have weighted down on demand and prices this year.
A Hit to Chinese Electric Bike Demand
Amid concerns about safety, Chinese municipal authorities imposed new regulations on electric or e-bikes this year, which account for about one-third of the country’s demand for lead-acid batteries.
New Tax on Lead-Acid Battery Makers
Lead depends on lead-acid batteries for about 80% of demand in top consumer China. The Chinese lead-acid battery sector has been struggling due to heavy price competition and was further hit after China imposed the 4% tax in January on batteries.
What This Means for Metal Buyers
Lead prices have become increasingly choppy this year. The metal has traded up and down in the price range of $1,570-$1,880 per mt for eleven consecutive months. Overall, lead fundamentals don’t look terrible but unless we see a major change in the macro-picture the supply surplus could continue to cap the upside.