C H R Metals. Lead market update. Huw Roberts CHR Metals. 5 th World Lead Conference March 19 th 2013

Transcription

1 Lead market update Huw Roberts CHR Metals 5 th World Lead Conference March 19 th 2013

2 How well has lead demand recovered from the recession? Demand has recovered from the 2009 recession but most growth has been in China In absolute terms global consumption in 2012 was 2.22Mt more than in 2008 an increase of almost 25% Outside China the increase was less than 200kt overall and demand down in Europe and up only 2% in North America still the largest markets ex-china Growth is forecast in 2013 but slightly slower in China, slightly faster ex-china Slide 2

3 Key drivers of lead demand Lead-acid batteries account for 85% of global lead demand In North America and Europe 70-75% used in SLI (auto) batteries; industrial batteries (stationary and motive power) account for balance In China, less than 30% for automotive market Largest use is in electric bicycles (2 & 3-wheel e-bikes) accounting for more than half of all lead used in batteries in China China s e-bikes account for just over 20% of global lead demand! Most demand from auto and e-bike markets is for replacement batteries rather than original equipment This also largely determines availability of battery scrap Slide 3

4 Where is demand growth strongest outside China? After China, USA and Europe, India is now the third largest market for lead Rise in conventional vehicle sales and growth in back-up power supply the key factors in India Korea has maintained a strong market position based on its auto industry (OE sales) and battery exports Brazil has seen steady growth as domestic demand has increased Thailand geared to supplying domestic auto industry strong in light trucks and exports India, Korea, Brazil and Thailand account for almost 60% of lead demand in Other countries Other All countries excluding China, North America and Europe Slide 4

5 Are lead supplies tight? Outside China lead demand grew by 1.6% in 2012 and was only slightly higher than in 2007 Growth forecast to be 2% in 2013, an increase of 130kt CHR Metals analysis shows lead market ex-china in moderate surplus each year between 2008 and 2011, and near balance in 2012 but forecast to be in modest surplus again in 2013 LME lead stocks rose from 22kt in late 2007 to peak at 370kt in late 2011 LME lead stocks have now fallen to 280kt with more than half on cancelled warrants There appears to be a long queue to take delivery from LME warehouses helping impression of a tight market Slide 5

6 Limited availability of LME stocks There is some evidence of LME stocks being drawn down to satisfy market demand Lead from Malaysia has been shipped to the USA Shipments from Singapore warehouses to Malaysia may now be held in non-lme warehouses Drawdown of LME stocks in Europe during Q simply a relocation of inventory from Spain to northern European warehouses LME European stocks higher now than a year ago! Modest fall in USA LME stock levels probably reflects release for consumption But LME lead in a queue in almost all locations and not available for prompt delivery This has help to create the impression of tight supply Slide 6

7 Can supply expand to ease market tightness? Outside China more than 75% of refined lead production derives from recycling or other secondary sources Almost all lead-acid batteries are already recycled and other sources of secondary supply (metallurgical residues, old sheet, cables) are relatively small and not dependent on developments in the lead market Weak demand for replacement batteries will mean less battery scrap and a decline in production but this is matched almost 1 for 1 by weaker demand for lead, albeit that there may be a small difference in timing Generation of battery scrap is relatively price inelastic Slide 7

8 Is new mine supply needed? New lead supply from mines is there to satisfy incremental demand, remaining uses where lead is not recovered through recycling and to replace lost output from end-of-life mines Mine supply is influenced by metal prices The requirement for higher mine production is relatively small Current lead prices and prices of its co and byproducts are high relative to mine costs, providing strong incentive to increase output Slide 8

9 Where does China fit in? Despite being the world s largest producer and consumer of lead, today China has limited influence on the global market Prior to 2006 China was a major exporter of refined lead but exports have dwindled since 2007 as a result of high export taxes equivalent to 27% China does import lead concentrate but there is limited smelter capacity outside China to treat significantly higher volumes although some changes are afoot China is also a major exporter of lead-acid batteries at the expense of producers elsewhere USA a major market Slide 9

10 Are lead prices reasonable? Relative to the direct cash costs of production, lead prices appear to be very high but prices still well below spike in April 2011 Market irrational at that time as supply clearly in excess of demand LME stocks rose 145kt in 2011 Rally from mid-2012 may now have run out of steam Slide 10

11 Key issues for the market -1 Although very large, the market for REFINED lead in China is somewhat isolated from other markets due to export tax regime China s influence is through its import of lead concentrates but requirement unlikely to grow INCREMENTAL growth in global battery demand can be met without significant increase in lead mine production lead mine production will tend towards surplus over the next few years New mines are needed but mainly to replace production lost through reserve depletion, not to meet growth Slide 11

12 Key issues for the market -2 The lead recycling business will grow steadily Environmental challenges in both mature and industrialising/ emerging markets More stringent air-lead standards in the USA can be met, but require investment in plant and equipment Control of battery scrap from collection to smelter a major factor for success in this industry Dynamics of scrap market in USA different from in Europe Price of lead remains well above actual costs of production High price of feed is the issue but scrap supplies appear to be easing Slide 12

13 In-depth analysis of the global lead and zinc industries Regular market commentary and detailed forecasts Confidential market research assignments Focus on Chinese lead and zinc industry developments CHR Metals Limited Hamble House Meadrow Godalming, Surrey GU7 3HJ, UK Tel: Slide 13 CHR Metals Ltd Xi an Representative Office Yulang International Room No 77 Jiefang Road, Xincheng District Xi an, Shaanxi , PR China Tel: Fax: