August 12, 2021: Lead prices and stock shortages have become a cause of concern for battery makers as demand picks up following a year and a half of lockdowns, Reuters reported on August 9.
In London after reaching a three-month high of $2,412.50/tonne on August 4, lead prices dropped to $2,275 before rising slightly to around $2,325 on August 10, but LME stocks are ‘super low’ with the physical supply chain ‘super stressed’, according to Reuters.
“All the world’s lead seems to be in China, where warehouses are full to bursting,” said the news agency. “Some of that surplus should be seeping out through the arbitrage window but so far there has been little sign of movement.”
LME stocks total 58,500 tonnes, Reuters says, down by almost 75,000 tonnes on the start of 2021.
In Europe, supplies have been hit by flooding at Germany’s Stolberg primary lead smelter, which has declared force majeure after devastating floods, causing it to halt shipments by at least a month.
And in North America, reduced operations at Canada’s Teck Resources’ Trail smelter, due to poor air quality caused by wildfires, are adding to supply issues.
“China is swimming in excess lead and the high SHFE price encourages smelters to keep making it and dumping it into warehouses to trouser the cash,” said Wood Mackenzie principal analyst, lead markets Farid Ahmed. “The options are that China starts exporting refined lead to the West where it’s needed, but this depends on the arbitrage window.”
Because the cost of local lead is usually far lower than refined lead imports, which are priced at its LME value plus premium, with import duty and VAT on top, it does not usually make sense for China to export it to the US, Ahmed said.
North America also has an issue with importing the batteries themselves because of congestion at Los Angeles and Long Beach, as well as rail and truck networks further on, media reports say.
“Together, Los Angeles and the nearby Long Beach ports account for over one third of these imports,” says Ahmed. “But they are experiencing near-record delays, with dozens of ships anchored off the coast waiting for a slot to dock and unload. Some ships have been waiting offshore for weeks.”