Lead Is Set to Fall as Supply Swells in 2010, According to CRU

LONDON, Dec. 2 -- Lead, 2009's best performer among the main industrial metals traded on the London Metal Exchange, is set to drop as supply increases next year, CRU said.

    The metal for three-month delivery was at $2,381 a metric ton on the LME at 12:14 p.m. local time. Prices have more than doubled in 2009, helped by record investor interest in raw materials and a weaker dollar, even as lead inventories monitored by the exchange have more than tripled. Lead will average $2,000 a ton next year, according to CRU.

    "Anything over $2,000 is a little bit on the bubbly side," Neil Hawkes, an analyst at the London-based researcher, said yesterday by phone. "The market is in surplus, and that will ultimately put some downward pressure on prices."

    More so-called primary metal probably will enter production in 2010, according to Hawkes. He also expects a gain in recycled lead coming to the market on stronger demand for batteries, the metal's main use. Still, increased consumption will pull the surplus of lead below 150,000 tons next year from about 350,000 tons this year, he said.

    Ivernia Inc. aims to restart its Magellan mine in Australia early next year after a health scare halted output. Renco Group Inc.'s Doe Run Peru unit may restart its La Oroya smelter, which was shut down in June, Hawkes said. Goldcorp Inc. is scheduled to commission its Penasquito mine in Mexico for commercial production by the end of this year.

    Battery Demand

    "You could have a scenario where you have La Oroya coming back up, Magellan coming on stream, and a lot more secondary coming through," Hawkes said.

    As battery demand strengthens, more recycled lead tends to reach the market as customers trade in old batteries when buying new ones, he said. Secondary metal accounts for about 55 percent to 60 percent of global supply, according to Hawkes.

    CRU has predicted an average price for lead this year of $1,715 a ton. Three-month metal has averaged about $1,687 so far in 2009 on the LME. After next year, prices may rise toward the 2007 record high of $3,890 a ton on a lack of new projects, stricter environmental rules and higher usage, Hawkes said.

    Commodities will likely attract a record $60 billion this year as investors seek to diversify their assets, Barclays said on Nov. 19. The U.S. Dollar Index, which gauges the greenback's performance against six currencies, has slid 8.3 percent this year, making dollar-priced metals cheaper in terms of other monies.

    Lead inventories tracked by the LME climbed for a sixth day today, gaining 0.4 percent to 138,450 tons, according to daily exchange figures. Stockpiles were 45,150 tons at the start of the year.

    (Source: Bloomberg)