LONDON – Mine disruptions have helped lead prices rally to one-year highs but plunging imports of the metal in top consumer China will mean an oversupplied market that will cap further gains despite sustained demand from the battery sector.
Also contributing to lead's 20% rise since the middle of October to around $2 100 a tonne on the London Metal Exchange are hopes for a swift global economy recovery due to vaccines that could end the coronavirus crisis.
Lead was the top performer among LME metals last month.
"Lead is riding on zinc's coat tails," said CRU analyst Neil Hawkes. Zinc's price premium to lead - a popular relative value trade - is now around $680 a tonne, having hit a year high of $809 a tonne in November.
Shipments of new and replacement automotive batteries in North America climbed 5% in August from the same month last year, figures from Battery Council International showed, after a 13% jump in July and 18% in June.
"After the easing of restrictions, a tsunami of batteries was discovered that had died during lockdown, particularly in North America," said Wood Mackenzie analyst Farid Ahmed.
"Battery makers are still struggling to catch up with pent-up demand and back-orders and now winter is coming, which is the seasonal 'battery kill' peak demand."
However, WoodMac still expects lead demand to contract 5.2% this year and not return to 2019 levels of consumption of 12.8-million tonnes until 2022.
Chinese imports of refined lead plunged 77% between January and October compared to the same period last year, to 20 318 tonnes.
The demand drop will push the lead market to a 276,000 tonne surplus this year, according to forecasts from the International Lead and Zinc Study Group.
Still, funds are betting on prices rising further, with the net long on LME lead sitting at its highest since February 2018, according to broker Marex Spectron, at 8.8% of open interest.