Lead prices will likely head south during the second half of this year in view of weak global demand, higher supply and a slowdown in the automobile sector besides the Russia-Ukraine war, analysts have said.
“We expect lead prices to edge lower over the second half of 2022 as global demand weakens. A combination of soaring energy prices and rising interest rates will continue to undermine global economic growth, as has increasingly been the case since Russia’s invasion of Ukraine in February,” said Fitch Solutions Country Risk and Industry Research (FSCRIR), a unit of Fitch.
5% price drop
The average price of lead is expected to drop by nearly five per cent year-on-year to $2,100 a tonne this year, said market research company IndexBox. “After a drop in 2021, global lead supply is expected to rise, primarily due to the increased output of lead-containing by-products from zinc mines and boosting recycling in China,” it said in its outlook recently.
Fitch Solutions said refined lead prices averaged $2,302/tonne during January-May and its forecast of $2,150/tonne for this year would mean that the rates would average at $2,041 during June-December.
On the London Metal Exchange, lead is offered on cash at $2,198 a tonne, while the metal for three-month delivery quoted at $2,195.50.
Transition to EVs
IndexBox said demand for lead is likely to decrease on falling demand for gas-powered vehicles which will result in reduced offtake of lead batteries alongwith the transition to electric cars with nickel-lithium batteries.
Fitch Solutions said a resulting slowdown in global auto production and sales will weaken demand for refined lead in the coming months. It forecast global consumption to contract by 3 per cent this year.
The International Lead and Zinc Study Group (ILZSG), in its recent outlook trends, said global demand for refined lead metal is expected to increase by 1.7 per cent this year to 12.42 million tonnes (mt) after a 4.1 per cent rise in 2021.
Supply to exceed demand
It said world lead mine production is forecast to rise by 2.9 per cent to 4.71 mt this year on expected increases in Australia, China, India and Kazakhstan. The Group said world refined lead metal is estimated to increase by 1.3 per cent to 12.44 mt influenced by rises in China, India, Kazakhstan and Mexico.
The ILZSG said global supply of refined lead metal will exceed demand by 17,000 tonnes this year, a clear pointer on why prices will head lower.
Fitch Solutions said localised scarcity of refined lead should also gradually abate this year as global supply is expected to improve. “Markets with ample supply such as China are beginning to increase exports to areas of tight supply such as the US, having previously been constrained by high shipping costs and port congestion,” it said.
Stocks higher in Shanghai
From being a net importer, China has become a net exporter since September last year since 2018. In the first quarter of this year, it exported 38,000 tonnes of refined lead, FSCRIR said.
The research agency also said the metal’s inventories at the Shanghai Futures Exchange remain significantly higher than the LME global warehouse total. This provide the scope for increased refined lead exports from China in the coming months and help in alleviating shortages in the global refined lead market in the near term.
IndexBox said refined lead prices increased by over 20 per cent last year to $2,200 a tonne on limited supply and a rise in demand for lead-acid batteries in view of booming car sales. Also, production decreased by 2 per cent to 4.3 mt due to closure of many secondary smelters.
No Russian impact
Fitch Solutions said it does not expect the Russia-Ukraine conflict to have an upward impact on lead prices as Kremlin’s supplies are limited. Disruption of exports from Russia, which accounted for 8.7 per cent of mined lead shipments and 2.8 per cent of refined lead exports to the global market last year, will not result in any price spike.
ILZSG said demand from the battery replacement market has underpinned global lead usage in most regions globally and has helped to offset a downturn in shipments of original equipment batteries, which have been affected by reductions in automobile output due logistics issues and a shortage of semiconductor computer chips.