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Smelters' fight for scrap remains driving force in US lead market: analyst

Increase font size  Decrease font size Date:2017-05-04   Views:437
The ongoing battle among lead smelters for a limited supply of lead scrap will remain the driving force in the US, and in many global, lead markets, a lead industry analyst said Tuesday. "In the US, it is the fight for supply that is still the main issue," said Neil Hawkes, an analyst with London-based CRU, speaking at the Battery Council International conference in Jacksonville, Florida.

But he said an outlook of steady demand growth for lead near term would ensure that more lead scrap is generated, he said.

Hawkes forecast a "steady, but not spectacular" demand-growth picture for lead. "There is room for reasonably robust demand growth," he said, in large part because of the increasing market for start-stop vehicle engines, which he said would help boost lead consumption.

He noted that, despite the emerging competitive threat from lithium-ion-based automotive batteries -- used in electrically powered cars -- most new cars still have a conventional design.

Although lead-demand growth in China has slowed, Chinese demand is still expected to rise to some degree this year, which he said still represents a sizable chunk of lead demand worldwide. "There was a fear that China's slowdown would worsen, but now it seems to be leveling out," Hawkes said. "The [growth] adjustment in China is over [with a] transition to a slower growth path."

Regarding lead's near-term supply picture, Hawkes said, "Alongside high recyclability rates and sufficient smelter capacity, secondary lead production will remain the main driver of global supply growth."

He said the supply of primary lead is gradually tightening both in China and in the rest of the world, noting that most mine projects in the pipeline are weighted toward zinc resources rather than lead.

"The longstanding fight for scrap is now being joined by a fight for concentrates," he said.

But Hawkes added the trend in mine-supply tightening is being offset to some extent by a jump in secondary lead production.

Hawkes said a small lead-supply deficit emerged in China last year, but has spread to other markets this year. Still, the supply gap for now is not "massive" and there remains the question of how much volume of lead stocks have built up in the interim.

He said there are also signs of a tightening trend in refined lead, but added, "we're not there yet."

Hawkes forecast LME lead prices staying rangebound for the time being at about $2,100-$2,200/mt, with some increase possible at year's end. He said prices were not likely to dip again below the $2,000/mt mark any time soon. LME three-months lead closed at $2,248/mt Tuesday, down $1.

"There is solid support for stronger lead prices," Hawkes said, in large part because of a tightening supply trend. Lead prices have also benefited from a broader rally across base metals, he noted.

Although zinc continues to be the complex standout, investors are starting to recognize lead's tie to zinc, increasing lead's investment appeal, he said.
 
 
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