Reuters reported that lead demand has been disappointing in recent months and with ample stocks sitting around in China the upside potential for prices looks to be limited in the next few months.
Mr Neil Hawkes of industry consultants CRU International said that "The bottom line is that there is plenty of lead. Demand is picking up a bit more but too much lead is being produced."
CRU estimates that some 300,000 tonnes of metal is sitting in stockpiles in the world's top producer and consumer China. But Mr Hawkes said that some analysts put the figure at double that amount.
Stocks of lead in London Metal Exchange warehouses have also continued to creep higher in recent weeks. While not high by historical standards they stand at 130,125 tonnes almost three times their end 2008 level.
Mr Angus MacMillan independent consultant thought that inventories in China would limit upside price potential to some extent. But he also saw little room for prices to fall, citing expected seasonally stronger demand for replacement batteries. He expected prices to trade in a USD 2,200 to USD 2,400 band through to the end of the year.
According to Neil Buxton MD of GFMS Consulting, the supply side was not a threat to the market's prospects. He said that "We're not necessarily saying there's going to be another leg up in prices from current inflated levels but there's limited downside."
Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in the rest of 2009 and into 2010.
Production:
October 26 - The International Lead and Zinc Study Group's latest monthly bulletin showed that the global lead market was in surplus by 57,000 tonnes in the January to August of 2009. Global refined lead use was 5.727 million tonnes compared with 5.721 million per year earlier. World refined lead output was 5.784 million tonnes up from 5.692 million in the same period of 2008.
October 22 - Doe Run Peru operations at its La Oroya smelter, stopped since June because of financial and environmental troubles, might not restart until 2010. The company, a unit of US based Renco Group had said in September that work at its La Oroya smelter would likely resume within a few weeks.
October 22 - China produced 2,842,400 tonnes of refined lead in the January to September of 2008 up 20.9% from the same period a year earlier. Output of mined lead rose by 8.3% over the same period to 1,076,800 tonnes.
October 21 - Peruvian mine workers returned to work after a 48 hour mining strike intended to pressure Congress to pass 2 bills that would improve labor benefits, the national association of mining unions said. Miners want the government to lower the age for retirement and lift caps on profit sharing, but it is not known when the bills might be put on the agenda for floor votes.
October 19 - China plans to move 15,000 residents in its biggest lead smelting area away from the plants in order to allow them to keep operating after tests showed over 1,000 children had excessive lead in their blood. Some smelters and lead production lines in Jiyuan, Henan province had shut for nearly 2 months after the lead tests. The lead plants include China's largest, owned by Yuguang Gold and Lead.
October 16 - Federal and state approval is expected imminently for a major expansion of Teck Resources Limited’s Red Dog lead zinc mine in Alaska. The mine, located on land owned by the region's native Inupiat Eskimo people would be allowed to start processing ore at a new site, Aqqaluk that would effectively double the 20 year old mine's lifespan, under the pending permits. A mine official said the expansion was needed to keep Red Dog from shutting in 2011. The mine operators hope to start working on the Aqqaluk deposit in early 2010.
October 13 - Japan's top lead smelters plan to produce 101,082 tonnes of refined lead in the October to March period up from 95,624 tonnes in the preceding 6 months and from 96,051 tonnes in the same period a year earlier.
October 12 - Doe Run said that it expects global demand to recover 2010 and will watch closely for improvements, adjusting its output to reflect this. The company said its Herculaneum lead smelter was still operating with a single furnace rather than two, producing around 10,000 tonnes per month of lead. Output was curtailed at the plan in October 2008 following a steep decline in metals prices.
October 12 - The International Lead and Zinc Study Group said that the global lead market will be in a surplus of just over 100,000 tonnes 2010 which will come on top of an 80,000 tonnes surplus in 2009. Global refined lead output is forecast to increase by 7.4% in 2010 while consumption is expected to rise by 7.2%.
(Sourced from Reuters)
