Next month is a landmark in Neil Hawkes’ career because it marks 35 years since he joined CRU — the global commodities business intelligence company — straight after graduation. For a job that started as a means to pay off his student loan, Neil happily concedes that staying with the same firm for over three decades is unusual.Here, he tells Shona Sibary what he loves about working in the industry and how lead batteries will still have a big role to play in the future.
Hi Neil. Thank you for talking to Batteries International. Can we start with why you describe lead as a steady performer?
It comes down to the so-called ‘closed loop cycle’. The main end use for lead is for replacement batteries and existing vehicles on the road. That comes back eventually as scrap which feeds into the recycling chain which then comes back as lead in new batteries and goes into replacing batteries again in vehicles.
That closed loop cycle is very efficient with high recycling rates. So unlike other metals that rely more on primary supplies from mining, lead is less reliant on that part of the supply chain and tends to have a much smoother market imbalance compared to other metals.
Because the imbalance between supply and demand on a global basis is less marked than in other metals that’s why it tends to be a steady price performer.
Also, with other metals you get mine disruptions, strikes etc and that can have a really huge impact on those metal prices — bigger than with lead because the numbers are much smaller on the mining side.
Having said that, there was an upward move in lead prices this spring, followed by a recent decline.
What was the reason for this?
The answer has nothing to do with lead industry fundamentals. It was more to do with just a broader investor move into metals, which was led by copper which is seen as one of the great shining lights of the green energy transition.
Investors thought the timing was right to buy into the copper story and so this spilt over into buying into other metals, including lead, and that pulled the price up.
They were taking their cue from expected future demand strength rather than just current demand. And current demand has been lacklustre of late.
So this realisation of the ‘here and now’ prompted a sell-off across all metals and lead prices came back down but because they didn’t rise as much in the first place, they didn’t subsequently fall as much either.
That’s been the story for lead for many, many years. If you look at the average price for lead, from 2010 to now, it’s in the low $2,100s per tonne. Typically, the price tends to pivot around that low $2,100s trading range. Sometimes, as it did in the spring, it gets up to above $2,300 and sometimes it dips below $2,000 but most of the time the price is just trading around that pivot point of $2,100.
What factors are at play at this price point in the future?
There are two. The first, that has surprised many this year, is that the Chinese lead market has become tighter than expected.
For many years there has been an excess of capacity to recycle the scrap. The feeling now is that because lithium batteries are accounting for a greater share of the Chinese market, China is ahead of the curve in terms of pushing lithium over lead.
The lead battery share had been starting to slip a little in recent years and that is now being reflected in less lead scrap hitting the market.
The second point is that China is a battery exporter. And those batteries that are exported do not go back into China as scrap (because China has a ban on lead scrap import)s. So, whenever that battery does fail it’s going to fail in some other parts of the world and not in China.
The lead scrap pool isn’t shrinking as such — more that it also isn’t rising as much as it was. The result of which means exports out of China of refined lead were a flood in the last two years but have now become a trickle this year.
Is this concerning?
Well, I’m even hearing rumours of some lead actually going into China in the months ahead rather than continuing to trickle out. The world is watching to see how this plays out over the next couple of months.
At the moment though, I don’t think anyone in the rest of the world is too worried.
And what’s the second factor?
The US presidential election is grabbing the headlines and that creates uncertainty about what the outcome is going to be come November and all the different implications this may have for global trade of specific metals and the green energy transition. The two parties have differing policies or plans for all those areas.
This is going to create volatility going through the autumn as well as in the run-up to the election. I wouldn’t like to say it’s going to be net positive or negative for lead at the moment.
But if, as we clearly saw in the spring, the copper price decides to have a big rally, or decides to have a big sell-off, then that will pull lead prices to some extent as well.
What about the EV market slowing down? What kind of impact will this have on lead?
It will generally be a positive. The broader CRU view is that the long-term trend is for ever greater vehicle electrification. But that road is becoming a little bit longer. This year EV sales have slowed. People are starting to question if they’ll be driving EVs in the next five or 10 years.
In the interim people are taking up more hybrid vehicles, the vast majority of which have lead batteries in them either as a starter or as an auxiliary function. Or just simply sticking with ICE vehicles for now.
Some of the full electric vehicles only use lithium batteries and there’s no lead batteries in them — but they are very much in the minority.
So it might be an issue for the 2030s in terms of being negative, but through this decade it’s arguably got a little better for lead demand.
Did you imagine when you left university that you would be working for the same company 35 years later?
No! It was just a way of paying off my student debt. Get a proper job for a couple of years and then see how it goes. Obviously, I’ve been seeing how it goes ever since at CRU. It’s the people at the company and in the lead industry that have kept me here.
I’ve formed good friendships and relationships in and around the industry and that sort of camaraderie has been a huge pull. Also, I think the independence of CRU means that I can be bearish if I want to about lead. I don’t have to always be positive about it! If I’m seeing a negative thing to say, then CRU doesn’t stop me from saying it. People respect us for that.
Finally… you must have seen so much change in the industry over the years. What has been the biggest swing?
When I first joined CRU somebody said: ‘You know the replacement of the lead battery is about five years away.’ And then, dot dot dot… And it’s like, it will ALWAYS be five years away. Lead has always had this threat of another battery chemistry coming along and replacing it completely wholesale.
Maybe the greatest impact to lead has been the China boom in the 1990s and 2000s and then more recently the emergence of lithium batteries taking share away from lead in all its uses..
How does lead fit into this brave new world? It’s not a black and white answer. Lead will still have a big role to play going forward, it’s just a changing role in among all these different battery chemistries.
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Neil joined CRU in 1989, after gaining a Geology degree at Southampton University in the UK. Today, he is a principal analyst responsible for its lead market analysis and is the main author of its reports, the Lead Market Outlook and the Lead Monitor. As a recognised authority on lead, he is a regular speaker at conferences and has also undertaken research in more specific lead industry topics.
