China slowdown drains lead of charge

China slowdown hurts demand. The country uses 40-50 per cent of global lead output



International lead prices have been cooling off for a year now. From about $2,300 a tonne in July 2014, prices on the London Metal Exchange have dropped over 25 per cent to around $1,700 a tonne now. This is amongst the lowest levels seen in the last five years. LME prices had touched a high of almost $2,900 a tonne in April 2011. In India, MCX futures prices too have mirrored international prices. From about ₹135 a kg a year ago, prices have currently slid to around ₹110 a kg.

Why prices fell

A major reason for the fall in prices was the lower-than-expected increase in demand for lead in 2014. According to the International Lead and Zinc Study Group (ILZSG), in 2014, global usage of refined lead was expected to increase 4.4 per cent to 11.73 million tonnes, compared with 2013. But actual demand remained subdued, growing only by 1.4 per cent to 11.28 million tonnes. With China accounting for 40-50 per cent of global lead usage, slower consumption in China hurt demand. The Chinese economy grew at the slowest pace in 24 years in 2014; hence, while refined lead usage in China was expected to go up 7.4 per cent in 2014, it actually moved up only 2 per cent.

Similarly, as against expectations of a modest increase in demand in the US, actual usage shrank 1.5 per cent. On the other hand, major producers, such as Europe (Belgium, France and Italy), China and the Republic of Korea reported a 60-80 per cent increase in refined lead production. Australia and Peru also reported about 25 per cent increase in mine production.

As a consequence of higher production and lower demand, while a shortage of 49,000 tonnes was expected, 2014 witnessed only a minor 5,000-tonne shortage in supply of refined lead.

The trends continued into 2015 as well. Latest available data shows that while world supply of refined lead stood at 4.243 million tonnes in January-May 2015, demand was a tad lower at about 4.236 million tonnes. Chinese demand dropped 3 per cent. Usage cooled off in Europe (down 2.5 per cent) and the US (down 6.9 per cent) as well.

Benign outlook

Lead prices may carry on at current levels in 2015, thanks to expectations of soft demand from top consumers. Chinese demand in 2015 is expected to be a déjà vu of 2014. Outside of the general economic slowdown, the ILZSG sees Chinese demand being affected by a slowdown in sales of e-bikes, which account for over 30 per cent of the lead metal usage there.

Usage in the US is expected to grow by a modest 1.2 per cent, while demand from Europe is expected to show a lower 0.8 per cent growth.

ILZSG forecasts for this year, released in end-April 2015, indicate that refined lead demand will be at 11.05 million tonnes this year. This is a downward revision from the estimate of 11.56 million tonnes made earlier. This is also lower than the 11.28 million tonnes of usage in 2014. Against this, refined lead production is expected to at 11.03 million tonnes, keeping both demand and supply almost on par.

The fall in prices and the subdued outlook are good news to battery manufacturers in India. Although lead is used for cable sheathing, making ammunitions, pigments, etc., about 80 per cent of the end-use is in batteries.

c:set var="prUrl" value="https://premium.thehindubusinessline.com" />

Read further by subscribing to

The Hindu Businessline

What You'll Get

  • Web + Mobile

    Access exclusive content of the Hindu Businessline across desktops, tablet and mobile device.


  • Exclusive portfolio stories and investment advice

    Gain exclusive market insights from the Hindu Businessline's research desk.


  • Ad free experience

    Experience cleaner site with zero ads and faster load times.


  • Personalised dashboard

    Customize your preference and get a personalized recommendation of stories based on your intrest.

This article is closed for comments.
Please Email the Editor