Lead stocks rise may be misleading on market fundamentals: Macquarie
London (Platts)--31Oct2012/949 am EDT/1349 GMT
Reported lead stocks have risen recently, mainly as a result of metal
previously withdrawn from LME warehouses in Asia being delivered back on to
warrant elsewhere in the world, investment bank Macquarie said in a research
"However, with open lead warrants in accessible LME locations at around
three-year lows, availability may be less than headline numbers suggest at a
time of year when lead demand is typically strong for seasonal reasons and
lead-making raw materials remain expensive," the bank said.
Macquarie said that the rise in LME lead inventories is therefore not
necessarily representative of a rise in available metal.
The bank said that cancellations had also increased to all-time record
highs and that the remaining stocks actually available to the market had
risen little higher than 2010 levels.
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"Over 130,000 mt of LME lead stocks are currently canceled, according to
the latest LME data, an all-time record, leaving 194,500 mt on warrant, but
even this does not paint the full picture," it said.
Macquarie said that of the stocks on warrant only 119,325 mt -- 60% of
the total -- was in accessible locations, namely Antwerp, Detroit, Johor and
Given the current warehouse queues at these locations the bank says that
it would take months before new deliveries could be withdrawn.
"This leaves on warrant LME lead stocks in accessible locations at
around three-year lows of around 75,000 mt," Macquarie said.
The bank said that these developments came at a time when demand for
lead was seasonally high due to increased replacement battery demand in the
Macquarie adds there has also recently been positive feedback on the
prospects for lead metal demand from a succession of major industry events
with the focus on increased use of lead-acid batteries in HEV's.
The bank also notes that raw material supply is uncertain with lead
concentrates increasingly difficult to treat, while China's lead mine output
In the secondary market, scrap also remains expensive which is squeezing
producer margins, the bank added.
"With available lead stocks potentially limited, the short-term outlook
for lead demand supported by seasonal factors and lead supply challenged, the
fundamental outlook for lead prices is positive," it said.
Three-months lead was trading at $2,059/mt on LMEselect at 1140 GMT
--Greg Smart, email@example.com
--Edited by Jonathan Dart, firstname.lastname@example.org