June 4, 2020: The price of lead could leap by 10% near term, says Farid Ahmed, lead analyst at Wood Mackenzie, the energy research consultancy. “There is good reason to expect the lead price to head quite strongly higher, possibly even troubling $1800/tonne, before the supply situation settles and prices simmer back down to current levels,” he says.
“We expect a short, sharp spike in auto replacement battery demand in the coming weeks as more economies emerge from lockdown. Most battery producers appear to be carrying good stocks of finished inventory but this unseasonal high demand could rapidly consume these stocks.”
Part of the reasoning behind this is that replacement battery demand is set to soar. Many cars across the global have sat idle in lockdown for two months or more.
Few owners will have had the foresight or facility to put their batteries on charge and may find a dead battery the first time they turn the ignition key after such a long lay-up.
Of those cars that have been driven during lockdown, many will only have done short distances to local shops and will not have recharged their starter batteries sufficiently from these brief journeys.
“With the scrap battery supply chain still struggling to get moving, raw materials supply to lead recyclers is flowing at much reduced volumes,” Ahmed says. “Meanwhile, efforts to contain the spread of the coronavirus continue to encumber mine production.
“This calls into question the ability of the lead producers to rapidly respond to a short but nearby peak in demand for refined lead. Exchange lead stocks are near historical lows, so will not be able to satisfy any shortfall in supply. So if — or when — we see this pinch, prices will head upwards.”
Compensating for that auto factories are starting to reopen. “This will help to create a pull on battery makers as original equipment demand ramps up again — even if somewhat gradually,” says Ahmed.
The price of lead can move rapidly with changing circumstances. The price of lead after the 2008 economic crisis dipped to a low in the $900s/t at the Christmas that year. Two years later it traded at around $2,500/t.
At the start of 2020 lead was priced at around $1,900/t. It hit a year low of $1,586/t mid-May.