Lead prices will likely be supported by demand from China’s automobile sector for the remainder of the year, with the global offtake expected to grow by 1.7 per cent this year, analysts say.
The outlook comes on the heels of the metal, which is used in automobile batteries, ammunition, weight belts, and soldering, dropping over 12 per cent in 2023, with 5 per cent of the dip coming in the past month.
Currently, lead for cash is quoted at $2,060 a tonne, and the three-month contract is ruling at $2,072 a tonne. In Shanghai, the near-term contract is quoted at $2,157.77 a tonne.
- Read: Lead prices likely to rule at levels similar to 2022
Mine output growth
According to the International Lead and Zinc Study Group (ILZSG), a UN body, global demand for refined lead metal is anticipated to increase by 1.7 per cent this year to 12.53 million tonnes (mt).
World lead mine production is forecast to grow by 2.8 per cent to 4.56 mt in 2023, principally due to an expected significant increase in Australia. ILZSG said global demand for refined lead metal will exceed supply by 20,000 tonnes this year.
Research firm BMI, a unit of the Fitch Solutions company, said rebounding global lead demand will result in a slight global production deficit in 2023, compared to a significant surplus in 2022.
“Lead demand growth will strengthen in 2023 due to stronger vehicle sales and production, particularly in Mainland China,” it said.
“Stronger lead consumption by Mainland China’s auto sector will prevent significant further declines in global lead demand and prices in 2023. In the longer term, environmental restrictions on lead mining and smelting will constrain production growth,” said BMI.
BMI forecast lead prices to average $2,150 per tonne in 2023, which would result in similar price levels to 2022.
According to ING Think, the economic and financial analysis wing of Dutch multinational financial services firm ING, total lead production gained 2.7 per cent year-on-year (YoY) to 3.08 mt, while consumption fell by 1.3 per cent YoY to 3.1 mt during January–March 2023.
“The lead market was estimated to have seen a marginal supply deficit of 19,000 tonnes in the first quarter, lower than the 1,43,000 tonnes deficit during the same time last year,” it said.
Chinese inventory up
BMI said accelerating lead demand, mainly due to China’s economic reopening, will support lead prices in the coming quarters. “However, weak demand growth in the rest of the world will limit the rise in refined lead prices in 2023 as a whole,” the research agency said.
ILZSG said that after rising by 0.9 per cent last year, Chinese demand is forecast to increase by a further 0.7 per cent in 2023. Rises are also expected in India, Japan, the Republic of Korea, Mexico, and the US, it said.
Shanghai Metal Market (SMM) Research said refined lead production will continue to decline slightly in May, and the average operating rate of primary lead producers will drop by 0.61 percentage points to 68.70 per cent.
It said inventory of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu, and Tianjin reached 36,100 tonnes, an increase of 8,600 tonnes from May 8.
ILZSG said further rises are expected in China, India, Kazakhstan, and Mexico supplies. “Output is also anticipated to increase in Australia, India, Kazakhstan, South Korea, Mexico, Taiwan, and the United Arab Emirates, where new capacity is expected to be commissioned,” it said.
Long term forecast unchanged
BMI forecasts a growth in global refined production by just 0.7 per cent in 2023.
BMI said lead mine production growth will start to decelerate in the coming quarters as the post-Covid rebound loses steam. “Slow growth should lift output back to around level with the 2013 peak by 2032,” it said.
“We have left our longer-term price forecasts unchanged, as we continue to expect a gradual uptrend in lead prices over the coming years,” the research agency said.