Future outlook for lead and lead batteries

Lead Market Outlook: Can the primary side deliver?

Christine Meilton (CRU, United Kingdom)

Mine cutbacks and closures led to three years of decline in lead mine output during 2015-2017, from which the industry is just starting to recover. Global output recorded a marginal, 0.2%, growth in 2018. Over this period concentrates stocks have been run down while the use of secondary materials has been pushed to the limit. Yet the primary lead requirement continues to grow. Although secondary sources now account for around two-thirds of global refined lead production, as the total lead market grows so does the gap between lead demand and secondary output, a gap that needs to be filled with primary materials.

Over the next five years CRU expects to see a positive, albeit modest, growth of just under 2% per annum in global refined lead demand, supported by the requirements of automotive and industrial lead acid battery sectors. Although EVs continue to make inroads into the automotive market, we still see potential growth in OE SLI battery demand over the next few years, while the existing vehicle population, which has grown strongly in recent years, will continue to need a growing number of replacement units. Moreover, stop-start vehicles, which need larger batteries, are still rising in number, boosting the lead requirements of the industry.

As a result, we see an increase in primary lead requirements of around 400,000t by 2023. With the concentrate market currently balanced, this means that a corresponding increase in lead mine production will be needed. But can the primary supply side deliver? Is there sufficient potential new mine supply out there and can it be realised? Or, is there an impending oversupply and can we expect to see the lead concentrates market, like that for its sister mining metal zinc, move back into a cyclical surplus? What are the potential barriers to lead mine supply growth? And finally, if the mine side can deliver, is there sufficient primary lead smelting capacity or will we face a smelting bottleneck? The presentation will look at all these questions and consider the potential sources of additional new mine supply.

Looking at potential mine supply over the next few years, we see that a significant proportion of the requirement can potentially be met from existing mines and committed expansions, reactivations and new projects. Reactivations in Australia are already boosting output, while a number of small projects are due on stream or are ramping up there; HZL’s expansions at its Indian mines will continue to lift output and several small expansions are due on stream in Mexico. Furthermore, we see a number of expansions or new projects due on stream in China. However, there are risks around all these projects, particularly in China where the sector has underperformed over the last two years and still faces environmental issues.

Moreover, much of this committed new supply will potentially start up over the next two-three years, and after this mine growth will be dependent on as yet uncommitted projects. However, there are few major lead mine projects in the uncommitted pipeline; most projects are zinc rich and lead poor, with just a couple of exceptions, Taylor in the USA and Abra in Australia. Although the short to medium term prospects for lead demand are still positive, longer term it faces a very uncertain future, which is a disincentive for investment in mining projects. Once the lead time has been factored in, we are considering a time horizon in most cases of some 15-20 years or more. Thus, while we expect the primary side to be able to deliver over the short term, further out there is considerable doubt as to whether it will be able to fill the gap.

Biography

Christine attended London University where she gained a BSc (Econ) from University College and an MSc (Econ) from the London School of Economics.

Christine specialises in the field of metal market and industry analysis and has worked in the base metals business unit at CRU for many years, where she has gained experience of the lead, zinc and copper markets, including refined metal and raw materials. She specialises on the supply side of the industry and has built up in-depth knowledge of the mining and smelting industries. Currently covering the lead and zinc industries, her work covers mine and smelter production and costs and analysis of the concentrates and scrap markets. She is editor of the monthly report on the Lead and Zinc concentrates markets, regularly writes the monthly report on the lead market and is responsible for the five year outlook for mine and smelter supply. Prior to working on lead and zinc she covered copper supply and concentrate market analysis, including the development of a copper smelting cost model.

Christine Meilton

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