LME Lead Prices


What is happening with the lead price?

The last decade was quite a roller coaster if we talk about the lead price. From being stuck at USD 500.=/mt the first three years the lead price reached the highest level ever of USD 4000,=/mt in early 2008. A weaker USD, hedging funds entering the metals market, China’s consumption of Lead were all mentioned as the reason for this extreme situation. A supply problem at a lead mine in Australia, with falling world stocks of lead as a result was the trigger for the lead price to jump as high as it did. What will happen with the lead price the coming months?


A short analysis:

1. The first graph of the lead price compared with the world stock of lead seems to look quite healthy. Lead stocks are getting up and as a reaction the lead price is going down. The basics of supply and demand seem to work...

lead-prices-lme-stocks-2-weeks



2. The second graph though shows a totally different situation. We are still talking about the lead price compared with the world lead stocks but increasing lead stocks AND increasing lead prices at the same time doesn’t make any sense...

lead-prices-lme-stocks-1-year



3. Especially if you take a look at the last graph which represents the lead price over past 10 years and compares this with the world stocks of lead over the last 10 years. Until mid 2008 it was all extreme was we have seen but in a certain way it was still explainable.


lead-price-lme-stocks-10-year

The last nine months though we see no sign of a correct market situation. Lead price as well as lead stocks are both increasing. The reason could be anything from large banks which are manipulating the market to gain profit on a short term to a big country which want to lower their USD currency reserves by stepping into metals.

The most dangerous thing about it is that the current situation is not representing physical supply en demand of lead. The buyers of the last 9 months don’t need the material physically so they can sell it back again on any moment to gain their profit. Looking at the last graph you can easily look in to the history of the stocks and see what the lead price was at the last moment the LME lead stock was as high as it is right now (about 160k mt). A massive correction of the lead price is waiting for us. When will it start?? Will it be a fast moving or a slow moving correction?? Maybe it has started already... (see figure 1)


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