Lead Will Strangulate Going Forward

Lead prices were quite volatile during the month of July. The prices tested a 1 month high on LME at $ 1757 per tonne on 24th July 2009. During the month the prices tested a low of $ 1589.50 per tonne on 14th July 2009. Rise in equity markets and fall in Dollar was supportive for Lead at the end of the month. In domestic markets Lead tested its peak of Rs 86.25 per kg on 28th July 2009. During the whole month inventories of LME kept on piling up which will be a cause of concern for Lead in the coming months. A pullback in the prices are expected as Dollar now seems to be consolidating after a fall against the EURO and consumption patterns are expected to proceed in similar muted lines with no drastic rise expected in demand.

World refined Lead Production Exceeds Usage-

The global Lead market was in surplus of 26000 tonnes in the first five months of the year (Jan-May 2009) as per the latest monthly report from ILZSG. According to the report during the first five months of 2009 world refined Lead metal usage was 3452000 tonnes as against 3464000 tonnes during the corresponding period previous year. The world Lead refined output for the period of Jan-May 2009 was 3478000 tonnes or down 0.17% as against 3472000 tonnes for the corresponding period previous year. World Lead mine output declined by 5% to 1468000 tonnes as against 1546000 tonnes in Jan-May 2008.

China production of Lead increases -

China was the main growth driver for the world demand of Lead during the recent months. China’s Lead concentrate imports jumped to 549687 tons in the first five months of 2009 up 13 percent. China produced 1358900 tonnes of refined Lead in the first five months 2009, this was up 20.4%. Chinese output of mined lead rose by 6.3 percent to reach 482300 tonnes during the period of Jan-May 2009.

Indian primary Lead production misses production targets -
Indian primary Lead production met the actual production targets by more than 40% in the month of June. Total production during the month of June was 5291 tonnes as against a production target of 3780 tonnes from Hindustan Zinc. Indian Lead is gearing up for production from its plants at Thane and Kolkatta and therefore the production was not reported. Total installed capacity for Indian Lead is 24000 tonnes. During the second quarter of 2009 (Apr-June) total production of refined Lead was 15218 tonnes down by 12% from the corresponding quarter of 2008.

Lead recovers in major exchanges-

The metal used in batteries has run up 85 percent on LME so far this year. During the month of July the prices have rallied 3% from $ 1705 per tonne to $ 1757 per tonne. The prices saw some profit booking in the initial period when it tested a low of $ 1589.50 per tonne on 14th July 2009, but later on weaker Dollar has helped the prices to recoup lost value. In Domestic futures markets, MCX Lead prices were in the range of Rs 82.85 per kg on 1st July 2009, it then went down towards Rs 75.75 per kg levels on 14th July 2009 and since then there was a steep rise in prices towards Rs 86.25 per kg.

Outlook-

Lead prices have rolled higher in 2009 even after the rise of stockpiles across the globe. If the demand doesn’t improve than the stockpiling will continue. LME stocks are already at 1 year highs. The stocks are currently at 3.6 weeks of consumption in May 2009 as against 3 weeks at the end of 2008. The demand worries are likely to emerge after the starts of major smelters and expansion plans of major smelters which will gyrate the inventories further. Therefore every rise in Lead is expected to be facing supplies. In domestic markets, prices are likely to encounter stiff resistance at Rs 86 per kg while Supports is likely to emerge around Rs 80 per kg.