SHANGHAI, Jun. 5 (SMM) – The World Bureau of Metal Statistics (WBMS) released May 22 the data concerning supply and demand in global base metals in Q1. Aluminum, zinc, nickel and tin markets showed no significant change and still saw oversupply during the first three months. Oversupply in copper market exacerbated from last year’s 192,000 mt to 252,700 mt. The conditions for lead sector were more delighting, with the market witnessing a 145,700 mt shortage, compared with the surplus of 22,100 mt a year earlier.
However, the positive market fundamentals failed to result in higher prices, instead, LME lead prices dropped USD 270/mt between December 31, 2012 and May 22, 2013, to USD 2,059/mt, a decline of 11%. This is mainly because the improvement in lead demand was not caused by stronger demand from end users, but the expansion in lead-acid battery industry.
In China, over 75% of lead is consumed in lead-acid battery industry. The increasing number of lead-acid battery producers following environmental protection inspections and aggressive expansion of the remaining enterprises drove up last year’s battery output. Notably, the output growth was also not driven by real demand from downstream sectors, such as electric vehicles and automobiles. Thus, China’s lead-acid battery industry is experiencing excess inventories. According to annual reports of listed battery companies, the value of inventories at China’s battery giants Tianneng and Chaowei hit RMB 1.95 billion and RMB 1.39 billion by the end of last year, up 73.72% and 55.47% from 2011.
Operation of lead smelters and lead price trends were largely influenced by the situation of lead-acid battery industry. Lead market was depressed when lead-acid battery declined due to anemic demand, while the improvement in lead-acid battery consumption only gave limited impetus to lead consumption as the high inventory level propelled battery producers to only deplete existing stocks. In this context, lead prices stood little chance to strengthen.
Furthermore, despite the improving fundamentals in global lead market, China’s refined lead supply did not fall short, with the demand level with supply in Q1 at some 1.076 million mt.
Overall, the outlook for nonferrous metals was not promising given strong US dollar, waning demand downstream.
Edited by SMM