Lead Sparkles In August-
Prices of Lead, Base metals used in batteries manufacturing, tested 11 months high after China shut down its smelters. China is the world’s largest producer and consumer of Lead. China shut 240000 tonne of annual lead smelting capacity in its top producing province of Henan after reports of lead poisoning in various areas, this provided bulls take advantage of the situation. The prices tested a 11 month high on LME at $ 2125 per tonne on 28th Aug 2009. During the month the prices tested a low of $1800 per tonne. Rise in equity markets and fall in Dollar also came in handy for Lead. In domestic markets Lead tested its peak of Rs 104 per kg on 28th Aug 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. The prices are expected to see buying at lower levels as Chinese shutdown of smelters will remove the excess inventories which will fill the gap of excess supply in the world.
World refined Lead market in surplus-
The global Lead market was in surplus of 37000 tonnes in the first six months of the year (Jan-June 2009) as per the latest monthly report from ILZSG. According to the report during the first six months of 2009 world refined Lead metal usage was 4204000 tonnes as against 4233000 tonnes during the corresponding period previous year. The world Lead refined output for the period of Jan-May 2009 was 4241000 tonnes or down 0.21% as against 4232000 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.
Australia, Germany, Italy, Japan, and US registered declines in refined metal output but that was offset by the increase of 14.4% in China. Chinese apparent Lead usage increased 25.3% while declines were recorded in Europe by 17.9% and in US and Japan by 11.6% and 47.1% respectively.
Chinese shut down smelters after the incidents of lead poisoning were witnessed in many areas across the country. The provinces where the problems of Lead emerged were Shanxi, Henan, Hunan and Guangxi. China’s total annual refined Lead smelting capacity is 2400000 tonnes out of which 10% or 240000 tonnes have been shut down.
Indian primary Lead production misses production targets
Indian primary Lead production missed actual production targets by more than 67% in the month of July. Total production during the month of June was 2171 tonnes as against a production target of 6551 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 period of Jan-July total production of refined Lead was 17389 tonnes down by 26% from the corresponding period of 2008.
Sharp rally in major exchanges
The metal used in batteries has run up 106 percent on LME so far this year. In August the prices have gained by 8.8 percent to $2125 per tonne on 31st Aug 2009. The inventories levels were on a higher side as well. The stockpiles rose by 13650 tonnes or 13% to 120950 tonnes. In Domestic futures markets, MCX Lead prices were in the range of Rs 90 per kg on 1st Aug 2009, it then went up towards Rs 104 per kg levels on 28th Aug 2009 a rise of 15% in a month.
Outlook:
Lead prices have rolled to 11 month highs in August itself, even after the rise of stockpiles across the globe but with reduction of excess supplies after China decision to close its smelters some more buying is likely to emerge. LME stocks are already at 1 year highs but we will see gradual decline after supply cuts from China come into affect. The stocks are currently at 3.7 weeks of consumption in June 2009 as against 3.6 weeks at the end of May 2009. In domestic markets, supports for the contract will be at Rs 95-96 per kg which is also a good level to initiate bottom fishing with price targets of Rs 104 per kg.
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