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Lead is expected to record a slight deficit in 2015. However, investors would do well to keep an eye on demand from the US and China.
For our 2016 lead outlook, please see: Lead Outlook 2016: Watch China for Cues.
2014 was a tough year for many metals, but fortunately for lead market participants, the base metal’s 2015 outlook is looking pretty positive.
Case in point: the International Lead and Zinc Study Group predicts that demand for refined lead will increase by 2.1 percent in 2015, hitting 11.6 million tonnes, while refined lead output will grow by 2.2 percent, reaching just 11.5 million tonnes. The organization thus anticipates a 23,000-tonne lead deficit in 2015, just slightly less than the 38,000-tonne deficit it sees coming in 2014.
Similarly, a recent Reuters poll shows that analysts believe lead will sell for $2,387 per tonne in 2015 — that’s a year-over-year rise of 11.5 percent.
Supply and demand drivers
In terms of what’s driving that positive outlook, Mining Australia states in its recently released 2015 outlook for lead that the “story of lead is very much one of increasing demand for batteries and power, with the price expected to increase in the near term.”
Supply will also be an important consideration, however. “Base metals have improved amid slightly more positive economic data in China and noticeably better news on the United States economy,” Justin Fabo, AZN’s head of economics, commercial and corporate, told the news outlet. “While the macro environment is showing signs of gradual improvement, it will continue to be supply-side issues that drive base metal markets; on that front, we continue to favor nickel and zinc in the near term,” he added.
The China factor
Mining Australia emphasizes that China in particular will play a huge role in lead’s performance in 2015. Indeed, back in 2014, disappointing data out of China was met with a decline in the price of lead, and the metal recently hit lows on the back of concerns about continued weak demand from the country. That’s a continuation of a pattern that began in 2013.
Similarly, Standard Chartered (LSE:STAN) released a report in November indicating that it has more confidence in metals that are not heavily exposed to China’s supply chain destocking cycle. That is because the country is experiencing a constrained credit environment, and its metals sector needs to be trimmed down.
Lead does have Chinese exposure, which could put pressure on the commodity in the year to come. Standard Chartered analysts believe the destocking cycle will be extensive, with only a little restocking in 2015. ”In this respect, we continue to expect base metals with least exposure to this dynamic on an LME basis to outperform, which places aluminum as the top pick,” Standard Chartered said in a statement, according to Kitco News.
Investor takeaway
Overall, in 2015 analysts expect lead to be produced in quantities almost sufficient to satisfy demand, but not quite. That’s similar to what happened in 2014, and may speak well of the metal’s price prospects. However, investors interested in lead would do well to watch the US and particularly China for signals on demand.
Related reading:
Lead Outlook 2014: Rising Demand, Shrinking Supply Could Mean Higher Prices