Africa will struggle to keep up with major lead-producing countries, such as China and Australia, owing to a lack of new projects in the pipeline, says credit and macro intelligence solutions provider Fitch Solutions commodities industry analyst Diego Oliva-Velez.
There are currently only four new lead projects in Africa, three in Namibia and one in Algeria, according to Fitch Solutions’ mining projects database.
“This number compares with five new tin projects, seven zinc projects, 12 nickel projects or 28 new copper projects in the region,” he points out.
“We estimate South Africa will produce 41 000.4 t of lead this year, up from 40 000.8 t in 2018. “We forecast production in the country to rise to 45 000.5 t by 2028. Meanwhile, Namibian lead production will reach 14 000.6 t in 2019 and rise up to 17 000.1 t by 2028.”
Oliva-Velez emphasises that this pales compared with Australia, the country with the most new projects currently in the pipeline. As 17 new lead projects are being developed on the continent, Fitch forecasts the country to lead global production growth over the next five to ten years.
“Lead production in Australia will post the highest growth out of the four biggest producers, from 2019 to 2028, as it bounces back from successive growth declines of 30.5% and 0.7% in 2016 and 2017 respectively. We forecast lead production in Australia to register an annual average growth of 2.6% over 2019 to 2028, in comparison with a 2.3% decline over 2009 to 2018.”
Australia will benefit from the strong project pipeline on the back of the world’s largest lead reserves, with 35-million tonnes as of 2016, which amounts to about 40% of global lead reserves.
Lead production in Australia is forecast to increase from 477 000 t in 2019 to 596 000 t in 2028, averaging growth of 2.6% year-on-year over the period.
“We expect Australian mining company Minerals and Metals Group’s $1.4-billion Dugald River mine, commissioned in May 2018, to be the driver of the country’s lead production over the coming years,” states Oliva-Velez.
Following Australia is China, the US and Peru as the largest producers of mined lead as of this year. Fitch forecasts that, in 2019, China will produce up to 2.6-million tonnes of lead, Australia 477 000 t, and the US and Peru about 306 000 t of lead each.
Further, higher global prices will lead to a continued recovery in global lead production this year.
Chinese Market Influences
Oliva-Velez states that, despite China being the biggest consumer of lead, weaker Chinese economic growth in 2019 could significantly affect lead prices.
“Our country risk team is forecasting Chinese real gross domestic product growth to average 6.2% in 2019, down from 6.6% in 2018. “This slowdown could result in lower domestic vehicle production than what we are currently expecting, which would likely negatively impact on demand for lead, which will put downside pressure on prices.”
A contributing factor placing pressure on global lead production, both mined and refined, would be environmental concerns, particularly in China, where government-led consolidations and closures could have a significantly negative impact on production levels.
With lead being a highly polluting and toxic metal, the Chinese government implemented a series of inspections on the lead-acid industry in Hebei province, in the latest effort to take stern measures against hazardous waste, in June last year.
US Market Influence
Environmental awareness will also play a role in the US, as the lead industry will face increasing competition from recycled products to achieve sustainable development.
“As an example, US lead refining company Aqua Metals’ AquaRefinery recycling facility, in Nevada, Las Vegas, produced the first ever Aqua-refined lead in November 2016, which has the capacity to produce 120 t/d as of 2018,” states Oliva-Velez.
The facility, looking to replace traditional lead smelters, uses Aqua-refining technology to recycle lead-acid batteries sustainably.
Fitch Solutions forecasts that the US’s lead industry will continue to grow at a slower pace than rivals as increasing production costs and environmental regulations eat into profit margins.
Moreover, subdued prices will force miners to reduce capital expenditure by scaling back, or even halting, operations, which will restrict growth in lead mine supply.
These factors will place US lead miners at a disadvantage when compared with producers such as Peru and Australia, says Oliva-Velez. US lead production is forecast to increase from 260 000 t in 2018 to 285 000 t in 2028, with an average growth of 0.9% year-on-year.
Oliva-Velez highlights that Fitch’s outlook for lead is generally less favourable than that of other base metals, as prices for nickel, copper, zinc and tin are all forecast to be higher than that of lead from 2019 to 2022.
“While lead prices are higher in the short term, we forecast lead prices to head lower, from $2 350/t in 2019 to $2 200/t by 2022, as the market will shift from a deficit to a surplus because of waning global demand. Nevertheless, we expect prices to remain supported this year and next year,” he concludes.