Lead prices’ big ride over the past few weeks reminds me of a day at Cedar Point. If you like amusement parks you have to check out the Point.
Lead prices surged in Q4, but prices increased too fast. With prices overextended in late November, a correction was of little surprise.
Prices fell sharply in December, bringing a great opportunity for buyers to purchase metal near support levels. A tightening market and recent weakness in the dollar pushed the metal higher in January.
The latest International Lead and Zinc Study Group data showed a tighter supply/demand situation. The lead metal supply exceeded demand by only 16,000 metric tons during the first 11 months of 2016.
In addition, global lead mine production fell 7.5% over the first 11 months of 2016 compared to the same period in 2015. As mine output falls at a faster pace than refined output, this should eventually lead to a depletion of concentrate stocks. Meanwhile, strong U.S. and Chinese auto sales in December bode well for lead’s demand.
When To Buy Lead
The lead supply/demand demand picture is not as bullish as zinc’s. However, lead’s production is falling and, in the context of a bull market in the industrial metals complex, we can expect prices to at least remain supported above $2,000.
On the other hand, given the increase in price volatility, it might take some time before prices overcome their peak in late November. Buyers can expect some range-bound trading ($2,000-$2,400) in Q1.