After falling 12%, lead prices likely to get support from China’s automobile sector
Lead prices are likely to be supported by demand from the Chinese auto sector for the remainder of the year, with global sales expected to grow 1.7 percent this year, analysts say.
The forecast follows the metal, which is used in car batteries, ammunition, weight belts and welding, falling by more than 12 percent in 2023, with the 5 percent drop coming in last month.
Currently, the lead price for cash is $2,060 a ton, and the three-month contract contracts at $2,072 a ton. In Shanghai, the short-term contract price is $2,157.77 per ton.
Mine production growth
According to the International Lead and Zinc Study Group (ILZSG), a United Nations body, global demand for refined lead metal is expected to increase by 1.7 percent this year to 12.53 million tons (metric tons).
Global lead mine production is expected to grow by 2.8 percent to 4.56 metric tons in 2023, mainly due to the large increase expected in Australia. ILZSG said that global demand for refined lead metal will exceed supply by 20,000 tons this year.
Research firm BMI, a unit of Fitch Solutions, said a rebound in global lead demand would result in a slight global production deficit in 2023, compared to a large surplus in 2022.
“Main demand growth will be strengthened in 2023 due to increased vehicle sales and production, particularly in mainland China,” it said.
price forecast
“Increased consumption of lead by the automotive sector in mainland China will prevent further significant declines in global lead demand and prices in 2023. In the longer term, environmental constraints on lead mining and smelting will constrain production growth,” BMI said.
BMI predicted prices to average $2,150 per ton in 2023, which would lead to similar price levels for 2022.
According to ING Think, the economic and financial analysis wing of Dutch multinational financial services company ING, total lead production rose 2.7 percent year-on-year to 3.08 million tons, while consumption fell 1.3 percent year-on-year to 3.1 million tons during December. Jan-March 2023.
“It is estimated that the main market witnessed a marginal supply deficit of 19,000 tons in the first quarter, lower than the deficit of 1.43 thousand tons during the same period last year,” it added.
Chinese stock
BMI said an acceleration in 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.
After rising 0.9 percent last year, ILZSG said, Chinese demand is expected to rise another 0.7 percent in 2023. Rise is also expected in India, Japan, the Republic of Korea, Mexico and the United States.
Research firm Shanghai Metal Market (SMM) said that refined lead production will continue to decline slightly in May, and the average run rate of primary lead producers will drop 0.61 percentage point to 68.70 percent.
It said lead ingot stocks in Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin amounted to 36,100 tons, up 8,600 tons from May 8.
ILZSG said further rises in supplies from China, India, Kazakhstan and Mexico are expected. She added, “Production is also expected to increase in Australia, India, Kazakhstan, South Korea, Mexico, Taiwan and the United Arab Emirates, where new production capacity is expected to be commissioned.”
Long-term outlook unchanged
BMI expects global refined production to grow by just 0.7 percent in 2023.
BMI said lead mine production growth will begin to slow in the coming quarters as the post-Covid recovery loses steam. “Slow growth should bring production to a level close to the peak in 2013 by 2032,” she said.
“We have left our long-term price forecast unchanged, as we continue to expect a gradual upward trend in lead prices over the coming years,” the research agency said.