Wondering how to get into lead metal investing? Our brief overview explains supply and demand dynamics and how to get started.
Because of its high resistance to corrosion, lead was once used in plumbing. Today, however, most lead is used to make lead-acid batteries — in fact, according to the US Geological Survey’s (USGS) latest report on lead, the lead-acid battery market accounted for over 93 percent of US lead consumption in 2019. Lead-acid batteries are primarily used to power vehicles, but they have other uses as well.
Read on for a brief overview of ways to invest in lead, from the supply and demand dynamics that determine lead prices to navigating the stock market.
Ways to invest in lead: Supply and demand
As mentioned, most lead is used industrially and consumed in large part by the lead-acid battery industry. These batteries are mainly used to power vehicles, but are also used in emergency systems, computers, forklifts and other equipment. In addition, lead is found in remote-access power systems, load-leveling systems and compounds used in the glass and plastics industries.
The International Lead and Zinc Study Group says that global refined lead consumption came in at about 11.86 million tonnes in 2019, down slightly from 2018. European demand has remained stable, while increases in Austria, Italy and Poland balanced reductions in France and the Czech Republic.
In terms of supply, it’s worth noting that lead has one of the highest recycling rates in the world. Secondary lead production accounts for more than half of global total output, states the International Lead Association. In Europe, more than 60 percent of lead comes from secondary production, while in the US that figure stands at more than 80 percent. Part of the reason lead is recycled so extensively is that it can be recycled indefinitely without any reduction in quality.
When it comes to mine production of lead, China is the biggest global producer of the metal by far. It put out 2.1 million tonnes of lead in 2019, far ahead of second place Australia at 430,000 tonnes. However, Australia leads the world in lead reserves, hosting upwards of 36 million tonnes. In recent years, according to the USGS, significant lead resources have been identified with zinc, silver or copper deposits in various countries around the world — including Australia, China, Mexico and the US.
Ways to invest in lead: Stocks, futures and ETPs
Investors who are optimistic about lead believe that the supply and demand dynamics mentioned above could push lead prices up in the coming years. While lead may be considered higher risk than other commodities, it can still prove to be worth the costs and energy.
But where is the best place on Wall Street to put your money into lead? Those who want to start investing in the sector have a variety of options.
Adding lead-mining stocks to your portfolio is one way to gain investment exposure to lead, but this route can be difficult, as lead is generally mined as a by-product of a precious metal such as silver, or fellow base metals copper and zinc. Major miners that produce some lead include BHP (NYSE:BHP,ASX:BHP,LSE:BHP) and Teck Resources (TSX:TECK.B,NYSE:TECK), though of course there are smaller companies that feature lead mines and assets in their portfolio.
Exposure to lead can also be obtained via futures contracts on the London Metal Exchange. Futures are traded in lot sizes of 25 metric tons, and their price is quoted in US dollars and cents per metric ton.
Another option is to invest in exchange-traded products (ETPs) with a focus on lead. A number of broad-based industrial metals ETPs offer lead exposure, including the Invesco DB Base Metals ETF (ARCA:DBB) and the iPath Bloomberg Industrial Metals ETN (ARCA:JJM).
There is also a pure-play lead ETP available called the iPath Bloomberg Lead ETN (ARCA:LD); it is linked to an index that consists of lead futures contracts.
This is an updated version of an article originally published by the Investing News Network in 2008.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.