Lead Futures Take a Hit as Risk Averse Investors Flee Base Metals

By Leia Michele  Toovey- Exclusive to Lead Investing News

Lead futures declined sharply on Monday, as risk-averse investors abandoned the volatile base metals market and headed for safe haven investments such as gold. Global equity markets declined, and the Euro plummeted to a four year low against the greenback, over resurrecting concerns regarding Europe’s debt crisis.

Lead market fundamentals remain weak, at least over the near term.  Stockpiles are rising and there is no sign of decreasing output, or increasing demand.  Lead for three month delivery on the London Metal Exchange hit $1,981, just slightly above the current cash buyer price $1,951 per tonne. Analysts predict that if lead breaks through the $1,950 support, the metal will fall to $1,800 before tracking a rebound. Current LME stockpiles are around 185,100 tonnes.

The International Lead and Zinc Study Group predicts that the lead market will close the year with less than 100,000 tonnes of surplus. The ILZSG forecasts global refined lead production will rise 7.5 percent this year to touch 9.41 million tonnes. Demand growth will nearly match production growth.  The ILZSG is anticipating a 7.3 percent growth in demand, equivalent to 9.31 million tonnes of supply. The ILZSG’s monthly bulletin showed that the global lead market was in surplus by 10,000 tonnes in the first 2 months of the year. Global refined lead use was 1.377 million tonnes compared with 1.277 million in January to February 2009. World refined lead output was 1.387 million tonnes up from 1.338 million per year earlier.

China, the world’s second largest lead producer, produced 859,000 tonnes of refined lead in the first 3 months of the year up 12.4 percent from the same period last year. Mined lead output rose by 64.9 percent over the same period to 338,000 tonnes.

Company News

Glencore International AG, has begun the process to once again begin mining at Iscaycruz, Peru, at one of the largest zinc and lead mines in the world. The privately held, Swiss-based company suspended its mining projects in Iscaycruz, in March 2009 after a staggering drop in the price of the metal in international markets. According to an executive of the Glencore subsidiary in Peru, reinitiating the mine’s operations will take at least a couple of months, if following the standard process to restart the mines. Glencore’s Iscaycruz produced 175,184 tonnes of zinc and 13,710 tonnes of lead in 2008.