Lead metal prices have dropped by nearly 10 per cent since the beginning of 2023 and they will likely rule in the $2,000 a tonne region this year — similar to 2022, analysts say.
On Friday, the lead three-month contract was quoted at $2,108 on the London Metal Exchange, while for cash the soft, malleable, ductile and bluish-white metal was offered at $2,106.
Demand higher than supply
The drop has come despite preliminary data compiled by the International Lead and Zinc Study Group (ILZSG) indicating that, in 2022, global demand for refined lead metal exceeded supply by 99,000 tonnes.
Inventories reported by LME, Shanghai Futures Exchange, producers, merchants and consumers decreased by 84,000 tonnes and totalled 3,14,000 tonnes at the end of the year.
Weak demand growth in the rest of the world will limit the rise in refined lead prices in 2023 as a whole,” said Fitch Solutions Country Risk and Industry Research, a unit of the Fitch Group.
But China’s lead demand will likely accelerate during the first half of 2023 due to the reopening of the economy in the Communist nation, which has ended its “Zero Covid” policy.
Price forecast
But Fitch Solutions lowered its price forecast for the metal, extracted from galena and found in ore with zinc, silver and copper. “We have lowered our 2023 average price forecast from $2,250/tonne to $2,150/tonne. This would imply similar price levels to 2022 when prices averaged $2,145/tonne,” it said in a note.
At least 80 per cent of lead is used in the production of batteries, while it is also used for lining tanks that store corrosive liquids.
Shanghai Metal Market (SMM) News said the supply of lead concentrates in 2023 is expected to increase with the pandemic subsiding and the commissioning of other mining projects that also contain lead ore.
Mine production seen 2.7% up
“The overall supply will maintain a tight balance. Lead consumption is expected to recover slightly in 2023,” it said.
ILZSG, a UN arm, said world lead mine production is forecast to rise by 2.7 per cent in 2023 and refined lead production is expected to rise by 1.8 per cent in 2023.
Global demand for the refined lead metal is expected to exceed supply by 42,000 tonnes this year.
Fitch Solutions said, “We expect lead prices to remain relatively stable over the first half of 2023 after the Q422 rally stalled in January.”
China’s GDP projection
The research agency said the upside pressure on prices will stem from a slight acceleration in global lead demand during the first half of 2023, mainly due to the reopening of China’s economy.
It forecast Mainland China’s real GDP growth at 5 per cent in 2023 compared with 3.0 per cent in 2022. “With estimates that around 80 per cent of China’s population had already been infected with Covid-19 by mid-February, rising herd immunity should shield the market from further disruption later on in the year, allowing for a healthier and more sustainable rebound in economic growth,” Fitch Solutions said.
However, the upside pressure on lead prices will be constrained by weak lead demand in developed economies. Much of this is expected in developed markets.
Long-term prospects intact
An analyst said lead prices will be suppressed in H1 2023 due to the “off-season of lead-acid batteries”. But rates are poised for significant gains in the second half with the arrival of the peak season in the lead-acid battery market.
Fitch Solutions has kept its long-term price forecast unchanged as it expects a gradual uptrend in prices in the coming years. “We forecast refined lead demand will steadily outstrip production over the rest of the decade, which will push prices gradually higher,” it said.