With lead prices surging nine per cent last month, the outlook for the metal has turned positive for the rest of the year and the first quarter of 2023.
“The most important driver of this turnaround has been a pickup in Chinese activity,” research agency Fitch Solutions Country Risk & Industry Research said in a commentary.
Chinese authorities have introduced a number of policies to help support the country’s real estate sector. “These measures encourage us to believe that real GDP growth in China will accelerate from 3.6 percent in 2022 to 5 percent in 2023. This should be accompanied by an increase in auto production and thus the world’s largest auto industry.” There should be consumer demand for lead in the metal,” said Fitch Solutions.
price prediction
As a result, the research agency raised its price forecast for lead, mainly used in car batteries and soldering, to $2,250 a tonne for 2023 from $2,110. However, it has left its long-term price forecast unchanged.
On Tuesday, the lead three-month contract was quoted at $2,212 on the London Metal Exchange, while the cash one was quoted at $2,193.50. (LME). Lead prices are up more than 5 percent in the past week and nearly 9 percent over the past month. Year-on-year, it has increased by less than 1 per cent.
Shanghai Metal Market (SMM) News said that there was a shortage of battery scrap in China’s northwest, north and Mongolia regions. In view of this, the smelters may extend their holidays till the middle or end of December.
Reports say that rising cases of Covid have affected the purchase of battery scrap in China.
‘Demand is facing headwinds’
Fitch Solutions said it has not made a “more significant upward revision” to its price forecast as demand in developed economies could remain sluggish in 2023.
“Our overall forecast for global growth in 2022 is roughly unchanged from October at 3.1 per cent, but our 2023 forecast has dropped to 2 per cent from 2.1 per cent. Fitch Solutions said the deceleration in global growth would be largely led by developed markets, which would see growth decelerate from 2.5 per cent in 2022 to 0.5 per cent in 2023.
However, the World Bank in its Commodities Market Outlook said that demand for lead is facing a slowdown due to weakness in the auto industry. “(Lead) production has not been subject to the disruptions that other metals face because lead refining is less energy intensive, and neither Russia nor Ukraine are major producers,” it said.
Lead prices are expected to drop 10 percent in 2023, in addition to an estimated 5 percent drop in 2022. The World Bank’s approach said, of lead batteries in EVs for auxiliary functions.
rising cost of electricity
Fitch Solutions said supply-side disruptions at auto factories would constrain production and thus limit demand for refined lead. Power costs for manufacturing firms will continue to rise, especially in Europe, while global semiconductor shortages will continue through 2023.
“We forecast global vehicle production to grow by only 2.3 per cent in 2022 and 4.1 per cent in 2023, compared to 2.4 per cent in 2021. This would be a weak rebound from the nearly 20 per cent contraction in global output in 2018-2020. It said..
The research agency said its outlook for global vehicle production is supported by the belief that the global semiconductor shortage will last well into 2023, with a modest recovery in supply in the second half and slowing demand from other sectors (mobile phones and computers). Will come ,
risk to outlook
Given this, it is projected to decrease refined lead consumption by 2.2 percent in 2022 before increasing by 2.4 percent in 2023.
Fitch Solutions said one risk to its outlook was a significant improvement in lithium supply prospects that would exert negative pressure on lead prices. “Such growth would require either more rapid growth in the global lithium mining sector than what we currently expect or technological improvements in lithium-ion battery recycling,” it said. Auto makers could seek to replace 12V lead-acid batteries with a lithium-based alternative if lithium supplies prove sufficient to meet projected demand from electric vehicle manufacturing, the research agency said.
Published on December 7, 2022